Question

T-bills currently yield 3.3 percent. Stock in Nina Manufacturing is currently selling for $70 per share. There is no possibility that the stock will be worth less than $63 per share in one year.

a-1.	What is the value of a call option with a $57 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call option value

$

a-2.	What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Intrinsic value

$

b-1.	What is the value of a call option with a $45 exercise price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Call option value

$

b-2.	What is the intrinsic value? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Intrinsic value

$

c-1.	What is the value of a put option with a $57 exercise price? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Put option value

$

c-2.	What is the intrinsic value? (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Intrinsic value

$

Answer 1

a .1. Value of the call option = $70 - (57/(1+0.033)) = 14.82

a 2. Intrinsic value = $70 - $57 = $13

b 1. Value of the call option = $70 - (45/(1+0.033)) = 26.44

b 2. Intrinsic value = $70 - $45 = $25

c 1. Value of put option = $0

c 2. Intrinsic value = $0