ch11 - Chapter 14 Options Markets Answers to odd-numbered...

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Options Markets Answers to odd-numbered problems Problems 1. A call option on Illinois stock specifies an exercise price of $38. Today's price of the stock is $40. The premium on the call option is $5. Assume the option will not be exercised until maturity, if at all. Complete the following table: Assumed Stock Price at the Time Net Profit or Loss per Share to Be Earned the Call Option Is About to Expire by the Writer (Seller) of the Call Option $37 $39 $41 $43 $45 $48 ANSWER: Assumed Stock Price at the Time Net Profit or Loss per Share to Be Earned the Call Option Is About to Expire by the Writer (Seller) of the Call Option $37 $ 5 $39 $ 4 $41 $ 2 $43 $ 0 $45 $–2 $48 $–5 3. A put option on Iowa stock specifies an exercise price of $71. Today's price of the stock is $68. The premium on the put option is $8. Assume the option will not be exercised until maturity, if at all. Fill out the table below for a speculator who purchases the put option (and currently does not own the stock): Assumed Stock Price at the Time Net Profit or Loss per Share the Put Option Is About to Expire to Be Earned by the Speculator $60 $64 $68 $70 $72 $74 $76 ANSWER: Assumed Stock Price at the Time
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ch11 - Chapter 14 Options Markets Answers to odd-numbered...

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