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The exercise price on one of ORNE Corporation's call options is $35 and the price of the underlying stock is $34. The option will expire in 55 days. The option is currently selling for $0.25.
a. Calculate the option's exercise value?
b. Calculate the value of the premium over and above the exercise value? What does this value represent?
c. Is this an out-of-the money option, at-the-money, or in-the-money? Why?
d. What will happen to the value of the option if the underlying stock price changes to $34.50? Why?
e. If this were a put option, would it have a greater or lesser value than the call option? Why?
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