What is the value of call option

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Reference no: EM131873205

The price of Ervin Corp. stock will be either $85 or $117 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 3 percent.

a. Suppose the current price of the stock is $95. What is the value of the call option if the exercise price is $80 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of the call option $

b. Suppose the exercise price is $110 and the stock price is $95. What is the value of the call option now? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of the call option $

Reference no: EM131873205

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