Problemthe exercise price on one of orne corporations call, Ask an Expert

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Problem:

The exercise 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.

Required:

Question 1: Calculate the option's exercise value?

Question 2: Calculate the value of the premium over and above the exercise value? What does this value represent?

Question 3: Is this an out-of-the money option, at-the-money, or in-the-money? Why?

Question 4: What will happen to the value of the option if the underlying stock price changes to $34.50? Why?

Question 5: If this were a put option, would it have a greater or lesser value than the call option? Why?

Note: Explain in detail and show all computations in proper way.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91170617

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