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mrs_skeptik [129]
3 years ago
10

The common stock of Mercury Motors is selling for $28.97 a share while one-year U.S. Treasury securities are currently yielding

2.8 percent. What is the current value per share of a one-year call option on Mercury Motors stock if the exercise price is $22.50 and you assume the option will finish in the money
Business
1 answer:
Usimov [2.4K]3 years ago
5 0

Answer:

$7.08

Explanation:

In short, Value of Call option = Stock Price - Strike Price

Current Value of Strike price = 22.50 * (1+2.8%)^-1

Current Value of Strike price = 22.50 * (1.028)^-1

Current Value of Strike price = 22.50 * 0.9727626459143969

Current Value of Strike price = 21.88715953307393

Current Value of Strike price = $21.89

Current Value of Stock = $28.97

Thus, Value of Call option = $28.97 - $21.89

Value of Call option = $7.08

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