What conditions does the holder of the option make a profit

Assignment Help Financial Management

Reference no: EM13813533

Suppose a European call option to buy a share for $100.00 costs $5.00. The stock currently trades for $97.00. If the option is held to maturity under what conditions does the holder of the option make a profit? Note: ignore time value of money.

A) When the price of the stock is greater than $102.

B) When the price of the stock is greater than $100

C) When the price of the stock is greater than $105

Please explain your answer.

Reference no: EM13813533

Questions Cloud

What information is the most critical for you to have right : You are the EH&S professional at your company's shipyard. You have just received a call from a production supervisor that there has been a very serious near miss accident out in the assembly area. What information is the most critical for you to ha..

Growth of hospitals and health care systems : "Growth of Hospitals and Health Care Systems with Benefits of Long-Term Care Facilities" Please respond to the following:

Mental health care administration and payment plan : Mental Health Care Administration and Payment Plan" Please respond to the following:

The standard deviation of these returns : A stock has yielded returns of 6 percent, 11 percent, 14 percent, and -2 percent over the past 4 years, respectively. What is the standard deviation of these returns?

What conditions does the holder of the option make a profit : Suppose a European call option to buy a share for $100.00 costs $5.00. The stock currently trades for $97.00. If the option is held to maturity under what conditions does the holder of the option make a profit? Note: ignore time value of money.

Two equal dividends are expected during the life of option : Consider an American call option when the stock price is $19, the exercise price is $21, the time to maturity is 6 months, the volatility is 25% per annum, and the risk-free interest rate is 10% per annum. Two equal dividends are expected during the ..

Is copying software moral or immoral : Is copying software moral or immoral

How do organizations measures risk : Identify the major business and financial risks such as interest rate risk, foreign exchange risk, credit, commodity, and operational risks.

Competitive compensation and benefits package : In addition, exit interviews with recent quits confirm what the attitude survey you conducted last year: morale is low, despite a competitive compensation and benefits package.

User Account

All Pages