In: Finance
Problem. Sugar Land stock is selling
for $47 and has the following six-month options outstanding.
Strike Price |
Option Market Price |
|
Call Option |
$45 |
$4 |
Call option |
$50 |
$1 |
a. Which option(s) is (are) in the money?
b. What is the time premium paid for each option?
c. What is the profit (loss) at expiration given different prices
of the stock, $30, $50, $55, and $65-if the investor buys the call
with the $45 strike price?
d. What is the profit (loss) at expiration given different prices
of the stock: $30, $50, $55, and $65-if the investor buys the call
with the $50 strike price?
e. Estimate profit and loss if the investor buys the stock and
sells the call with the $50 strike price if at the expiration stock
price are: $30, $50, $55, and $65 . What is the breakeven stock
price at expiration for investor to make profits?
f. Estimate profit and loss if the investor buys the stock and
sells the call with the $45 strike price if at the expiration stock
price are: $30, $50, $55, and $65. What is the breakeven stock
price at expiration for investor to make profits?