What the premium and exercise price represent

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Reference no: EM132797433

An investor observes a call option on a share which has a premium of $0.68, an exercise price of $13.00 and an expiry of 3 months. The share has an underlying share price of $11.00

Problem 1: Describe a call option, and explain what the premium and exercise price represent.

Problem 2: If an investor believes the share price will increase to $15 over the next 3 months, how can the investor use a call option to benefit from their belief?

Problem 3: At what point would the investor exercise the call option?

Reference no: EM132797433

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