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  3. a) if cherry jones was to take a long position in

a) If Cherry Jones was to take a long position in an option which of...

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Question

Finance

a) If Cherry Jones was to take a long position in an option which of the following would have the lowest maximum payoff? (2 Marks)

Answer: AnswerCallPut

b) If Tom Jones held a long call on ABC shares and the premium was 32c, the spot price was $6 and the exercise price was $3.20, the current profit that Max can earn is: (2 Marks)

Please answer as a decimal to 2 decimal places.

Answer: Answer(Note answer in dollars and cents)

c) If Max Jones was to buy DEF calls at a premium of $3 and the exercise price was $22.00 and the current spot price was $22.50, in the box below write down the following two numbers: (2 Marks). Answer to the nearest cent. with no $, or other symbols.

Intrinsic Value

AnswerAnswer

Time Value

Answer: Answer

d) Describe the impact that the following actions would have on the value of a call option (2 Marks):

Increase in the exercise price

Answer
Decrease in the time to maturity

Answer

Decrease in the spot price of the underlying Security

Answer

Decrease in the volatility of the underlying Security

Answer

Answer & Explanation Solved by verified expert
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