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Problem: Calculating Option Values

The price of Swearengen, Inc., stock will be either $72 or $94 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.

a. Suppose the current price of the company's stock is $83. What is the value of the call option if the exercise price is $68 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call value $

b. Suppose the current price of the company's stock is $83. What is the value of the call option if the exercise price is $78 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call value $

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M93044250

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