What is the intrinsic value

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Reference no: EM13917568

Coca-Cola currently has a stock price of $53.75. It also has eight options available with the following Expiration Date, Strike Price (Exercise Price), and Option Price. For Example, you can buy a Feb 55 Call for $3.6 (or you could sell it for $3.6). The risk free rate between now and Feb is 2% while the risk free rate between now and May is 3%.

Expiration       Strike              Discounted                  Call                 Put

Month             Price                Value                           Price                Price

Feb                  50                    49.02                           4.2                 

Feb                  55                                                                                3.30

May                 50                                                                                .75

May                 55                    53.40                           3.6                 

1. What is the Intrinsic Value (or Exercise Value) of the Feb 55 Put option?

a) $0             b) $1.25              c) $2.05            d) $3.3

2. What is the Time Value (or Premium) of the Feb 50 Call option?

a) $0.45             b) $1.25         c) $3.75            d) $4.2

3. Using Put-Call Parity, what is the value of the May 55 Put option?

a) $1.15             b) $2.85          c) $3.25           d) $4.85

Reference no: EM13917568

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