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What is the time premium paid for option

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Reference no: EM133120647

Problem

Victoria Company is selling for $94 and has the following six-month options outstanding.

 

Strike Price

Option Market Price

Call Option

$95

$2

Call option

$90

$8
  1. Which option(s) is (are) in the money?
  2. What is the time premium paid for each option?
  3. What is the profit (loss) at expiration if at expiration the stock price is $120 and if the investor buys the call with the $95 strike price?
  4. Estimate profit and loss if the investor buys the stock and sells the call with the $90 strike price if at the expiration stock price is $120.
  5. For the above question 4, what is the breakeven stock price at expiration for investor to make profits?

Reference no: EM133120647

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