Solve for the call option premium given the following information: Current Stock Price: $63 (non-dividend paying stock) Strike...

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Finance

Solve for the call option premium given the followinginformation:
Current Stock Price: $63 (non-dividend paying stock)
Strike Price: $65
Risk Free-rate: 5.00%
Time to expiration: 9 months
Put premium: $5.50
If the above call option is an American-style call option, wouldit make sense for the holder of the option to exercise the optionbefore expiration? Why or why not? Based on what you know about therelationship between American and European options, what is thecall option premium of an American-style option given the abovedata?

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4.3 Ratings (938 Votes)

Current Stock Price S0 63 nondividend paying stock Strike Price K 65 Risk Freerate r 500 Time to expiration T 9 months 912 075 year Put premium P0 550 PV K Present value of K K 1 rT 65 See Answer

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Solve for the call option premium given the followinginformation:Current Stock Price: $63 (non-dividend paying stock)Strike Price: $65Risk Free-rate: 5.00%Time to expiration: 9 monthsPut premium: $5.50If the above call option is an American-style call option, wouldit make sense for the holder of the option to exercise the optionbefore expiration? Why or why not? Based on what you know about therelationship between American and European options, what is thecall option premium of an American-style option given the abovedata?