You have taken a long position in a call option on ibm, Ask an Expert

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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $143 and IBM's stock currently trades at $145. The option premium is $5 per contract.

a. How much of the option premium is due to intrinsic value versus time value? Option Premium Intrinsic value $ Time value

b. What is your net profit on the option if IBM’s stock price increases to $155 at expiration of the option and you exercise the option? (Negative amount should be indicated by a minus sign.) Net profit $ per share

c. What is your net profit if IBM’s stock price decreases to $135? (Negative amount should be indicated by a minus sign.) Net profit $ per share.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92758690

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