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The strike price on one of ORNE Corporation's call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The option is currently selling for $0.25.

a. find out the option's exercise value?

b. find out the value of the premium over and above the exercise value? What does this value represent?

c. Is this an out-of-the money option, at-the-money, or in-the-money? Why?

d. What will happen to the value of the option if the underlying stock price changes to $34.50? Why?

e. If Orne Corporation had issued a put option (instead of the call), would it have a greater or lesser value than the call option? Why?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M938453

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