Jackson Corporation stock is selling for $45 per share. Aninvestor is considering buying a call option with an exercise priceof $50. The investor is willing to pay the premium of 55 cents peroption. Please work in excel and show how you derived theanswer.
A. Calculate the exercise value of the option?
B. Why is an investor willing to pay 50 cents an option when thestock is going for $45?
c. Calculate the exercise value if the price of the stockincreases to $52 per share.
d.Ă‚Â Ă‚Â What is the difference between a put option and acall option?
e.Ă‚Â Ă‚Â If the exercise price for both the call option andthe put option is $50, which will have a higher premium if theunderlying stock price falls to $40 per share?Ă‚Â Ă‚Â Why?
