60.1K

Verified Solution

Link Copied!

The price of a stock is $$45,$ and a six$-$month call with a strike price of $$40$ sells for $$11.$ Round your answers to the nearest dollar.

a$.$ What is the option's intrinsic value?

$

b$.$ What is the option's time premium?

$

c$.$ If the price of the stock rises, what happens to the price of the call?

As the price of the stock rises, the value of the call

d$.$ If the price of the stock falls to $$41,$ what is the maximum you could lose from buying the call? Enter your answer as a positive value.

$

e$.$ What is the maximum profit you could earn by selling the call uncovered $($naked$)?$

$

f$.$ If$,$ at the expiration of the call, the price of the stock is $$40,$ what is the profit $($or loss$)$ from buying the call? Enter your answer as a positive value.

The

from buying the call is $

g$.$ If$,$ at the expiration of the call, the price of the stock is $$40,$ what is the profit $($or loss$)$ from selling the call naked? Enter your answer as a positive value.

The

$]$ from selling the call naked is $

h$.$ If$,$ at the expiration of the call, the price of the stock is $$53,$ what is the profit $($or loss$)$ from buying the call? Enter your answer as a positive value.

The

from buying the call is $

i$.$ If$,$ at the expiration of the call, the price of the stock is $$53,$ what is the profit $($or loss$)$ from selling the call naked? Enter your answer as a positive value.

The

$|$ from selling the call naked is $

Answer & Explanation Solved by verified expert

See Answer