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You have taken a long position in a call option on IBM common stock. The option has an exercise price of $156 and IBM's stock currently trades at $160. The option premium is $5 per contract.
a. How much of the option premium is due to intrinsic value versus time value? Option Premium
intrinsic value
Time value
b. What is your net profit on the option if IBM's stock price increases to $170 at expiration of the option and you exercise the option? (Negative amount should be indicated by a minus sign.)
Net profit $ per share
c. What is your net profit if IBM's stock price decreases to $150? (Negative amount should be indicated by a minus sign.)
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