A particular call is the option to buy stock at $25. It expires in six months and currently sells for $3 when the price of the stock is $27.
a. What is the intrinsic value of the call? Round your answer to the nearest dollar. $
What is the time premium paid for the call? Round your answer to the nearest dollar. $
b. What will the value of this call be after six months if the price of the stock is $20, $25, $30, $40? Round your answer to the nearest dollar.
Price of the stock Value of the call at expiration
$20 ?
$ 25 ?
$30 ?
$40 ?
c. If the price of the stock rises to $40 at the expiration date of the call, what is the percentage increase in the value of the call? Round your answer to one decimal places. %
d. If an individual buys the stock and sells this call, what is the cash outflow (i.e., net cost)? Round your answer to the nearest dollar. $
What will the profit on the position be after six months if the price of the stock is $10__?, $15__?, $20__?, $25__?, $27__?, $30__?, $40__? Round your answer to the nearest dollar.
e. If an individual sells this call naked, what will the profit or loss be on the position after six months if the price of the stock is $25__?, $27__?, $40__? Round your answer to the nearest dollar.