18 Case model - 18 Case Model 3/22/2010 7:08 2/22/2006...

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18 Case Model 3/22/2010 7:08 2/22/2006 Chapter 18. Derivatives and Risk Management PART E Stock price $25.00 $3.00 30.00 7.50 35.00 12.00 40.00 16.50 45.00 21.00 50.00 25.50 Strike Price $25.00 Price of Strike Exercise Option Option Stock Price Value Market Price Premium $25.00 $25.00 $0.00 $3.00 $3.00 30.00 25.00 5.00 7.50 2.50 35.00 25.00 10.00 12.00 2.00 40.00 25.00 15.00 16.50 1.50 45.00 25.00 20.00 21.00 1.00 50.00 25.00 25.00 25.50 0.50 (2) What happens to the premium of option price over exercise value as the stock price rises? Why? PART F (3) What is the value of the following call option according to the OPM? Stock price $27 Exercise price $25 This spreadsheet model is designed to be used in conjunction with the chapter's integrated case and the related PowerPoint slide presentation. Assume that you have just been hired as a financial analyst by Tropical Sweets Inc., a mid-sized California company that specializes in creating exotic candies from tropical fruits such as mangoes, papayas, and dates. The firm’s CEO,
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18 Case model - 18 Case Model 3/22/2010 7:08 2/22/2006...

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