Question

Problem 24-2 Understanding Option Quotes [LO1]

Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $68.

						Calls						Puts
				Strike
Option	Expiration			Price		Vol.			Last			Vol.			Last
RWJ		Mar		63			238			4.00			168			4.10
		Apr		63			178			9.85			135			8.85
		Jul		63			147			10.70			51			12.05
		Oct		63			68			11.60			19			11.25

a-1.	Are the call options in or out of the money?
	In the money Out of the money

a-2.	What is the intrinsic value of an RWJ Corp. call option?

b-1.	Are the put options in or out of the money?
	In the money Out of the money

b-2.	What is the intrinsic value of an RWJ Corp. put option?

c-1.	Two of the options are clearly mispriced. Which ones?
	Mar callunanswered Apr callunanswered Oct callunanswered Mar putunanswered Oct putunanswered Apr putunanswered

c-2.	What is the arbitrage profit you could make on each of the mispriced options? (Round your answers to 2 decimal places, e.g., 32.16.)

Answer 1