Course Hero Logo

Assume we have a stock currently worth 100 we also

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 15 - 17 out of 20 pages.

63.Assume we have a stock currently worth $100. We also assume the interest rate is zero, andwe can buy options for this stock with a strike price of $100. If the stock can rise or fall by $20with equal probability over the option period, and the option cannot be exercised until theexpiration date, what is the time value of the option?a. $20b. $0c. $10d. $100
64.Assume we have a stock currently worth $100. We also assume the interest rate is zero, andwe can buy options for this stock with a strike price of $100. If the stock can rise or fall by $5with equal probability over the option period, and the option cannot be exercised until theexpiration date, what is the time value of the option?
65.Assume we have a stock currently worth $50. We also assume the interest rate is zero, andwe can buy options for this stock with a strike price of $50. If the stock can rise or fall by $10with equal probability over the option period, and the option cannot be exercised until theexpiration date, what is the time value of the option?
66.As the volatility of the stock price increases, the time value of the option:
d. doesn't change.67.An option's value will never be less than zero because:a. the intrinsic value is always less than zero.b. the option seller is required to make up any shortfall faced by the option buyer.c. an option holder will never make an additional payment to exercise the option.d. the time value of the option is always less than zero.
68.The intrinsic value of a call option:

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 20 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
N/A
Tags

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture