How much total profit could make in total dollars

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Given your good service with your company you are offered $250,000 face value of 5 year unlisted options on the company stock that is presently trading out of the money by $1.00. Today's market price is $28.00. Stock Market Analysts on the company believe that the stock is quite volatile and that its price could range between $5.00 (low) to $35.00 (high). You notice that in the publicly traded market that a similar option is offered at $6.50. The cost of money is 3%.

Problem a) What is the value of the call option on the stock

Problem b) Break apart your answer into both the fundamental value of the option and its speculative/time value.

Problem c) If you could sell your private option on the public market, how much total profit/loss could you make in total dollars on the option grant your company gave you?

Reference no: EM132958796

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