What is the minimum price you will be willing to pay today

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Today is December 31, 2016! The current price of Crilor Inc. stock is $36.76 per share. Crilor has the following options trading: (A) January Call Option with an exercise price of $35. (B) April Call Option with an exercise price of $35. (C) January Call Option with an exercise price of $40. (D) January Call Option with an exercise price of $45. (E) April Put Option with an exercise price of $45.

a) What is the minimum price you will be willing to pay today for each option? Briefly explain.

b) How will the market price of each option compare to the minimum price you will pay?

c) When are the options likely to be exercised?

d) For which option will you pay a higher price – option (A) or option (B)? Why?

e) For which option will you pay a higher price – option (C) or option (D)? Why?

f) What will happen to the price of the options if the risk (and therefore the volatility of stock price) of Crilor increases?

Reference no: EM131330637

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