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

This preview shows pages 1–2. Sign up to view the full content.

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

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/12/2011 for the course ECON 101 taught by Professor Buddin during the Spring '08 term at UCLA.

### Page1 / 3

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

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online