Calculate the option exercise value

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Reference no: EM132036830

The exercise price on one of Jarus Corporation's call options is $45 and the price of the underlying stock is $44. The option will expire in 25 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 market price of the option if the underlying stock price changes to $44.50? Will the exercise value or the time value change? Explain.

e. If Jarus Corporation had issued a put option (instead of the call), would it have a greater or lesser value than the call option? Why?

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Reference no: EM132036830

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