The price of Swearengen, Inc., stock will be either $83 or $105 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.
a. Suppose the current price of the company's stock is $94. What is the value of the call option if the exercise price is $79 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Call value $
b. Suppose the current price of the company's stock is $94. What is the value of the call option if the exercise price is $89 per share? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Call value $