Question
In: Finance
Problem 24-4 Calculating Option Values The price of Chive Corp. stock will be either $102 or...
Problem 24-4 Calculating Option Values
|
The price of Chive Corp. stock will be either $102 or $132 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 4 percent. |
| a. |
Suppose the current price of the company's stock is $110. What is the value of the call option if the exercise price is $90 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| b. | Suppose the exercise price is $125 and the current price of the company's stock is $110. What is the value of the call option now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
Solutions
Expert Solution
Solution a>
The value of the call is $23.529
The solved excel sheet along with the formula sheet is given below.
The formula used are:
Solution b>
The value of the call is $2.8
The solved excel sheet along with the formula sheet is given below.
The formula used are:
Note: Give it a thumbs up if it helps! Thanks in advance!
jeff jeffy answered 2 years agoRelated Solutions
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