Calculate value of premium over and above exercise value

Assignment Help Business Management

Reference no: EM13721471

The exercise price on a call option is $30 and the price of the underlying stock is $35. The option will expire in 35 days. The option is currently selling for $5.75.

a. Calculate the option's exercise value?

b. Calculate the value of the premium over and above the exercise value?

c. Is this an out-of-the money, at-the-money, or in-the-money option?

d. What will happen to the time and exercise value of the option if the underlying stock price changes to $30?

e. Is this an example of a covered call option or a naked call option?

Reference no: EM13721471

Questions Cloud

What is the bonds current value : Eight years ago, Over-the -Top Trampolines issued a 15-year bond with a $1,000 par value and a 6 percent coupon rate (interest is paid annually). Today the going rate of interest on similar bonds is a 6 percent.

What is the current market value of elites bond : Eleven years ago, Elite Elements issued a 15-year bond with $1,000 face value and a 5 percent coupon rate of interest (paid semi-annually). If investors require a return equal to 7 percent to invest in similar bonds, what is the current market value ..

What stock price should bondholders convert : Many years ago, Winding Road Maps issued a convertible bond with a conversion ratio equal to 40. The bond's face value is $1,000. (a) For how many shares of stock can a bondholder convert each bond? (b) At what stock price should bondholders convert?

Cash outflows related to call premium and underwriting cost : Dairy Corp. has a $10 million bond obligation outstanding which it is considering refunding. The bonds were issued at 10% and the interest rates on similar bonds have declined to 8%. The bonds have five years of their 20-year maturity remaining.

Calculate value of premium over and above exercise value : The exercise price on a call option is $30 and the price of the underlying stock is $35. The option will expire in 35 days. The option is currently selling for $5.75.

What is the present worth of the future payments listed : What is the present worth of the future payments listed below:

Discuss the process of a firm going through a security issue : Discuss the process of a firm going through a security issue by providing a through explanation of each stage. Be sure to address differences in the ways an issue can be brought to market, the decision making process for the issuing firm, risk factor..

Market rate of interest on similar bonds is eight percent : Ace Apparel, Inc., a manufacturer, has just issued $1,000,000 principal amount of bonds with a six percent semi annual coupon and a maturity of twenty years. The market rate of interest on similar bonds is eight percent (compounded semi annually)

Calculate the operating cash flow : Who Dat Restaurant is considering the purchase of a $27,000 soufflé maker. The soufflé maker has an economic life of six years and will be fully depreciated by the straight-line method. The machine will produce 2,300 soufflés per year, with each cost..

User Account

All Pages