Enriquez, Paulo

Guerra, Paula
Lacson, Princess
Lugo, Bianca
Ocampo, Paulline
Tabinas, Angel
BSAC01

Collaborative Tasks - Derivatives And Risk Management

Problem 1 
A call option on Suzuki Fashion stock has a market price of $2.  The stock sells for $50
a share, and the option has an exercise price of $55 a share

Market Price =$2

Stock Price = $50
Exercise Price = $55

A. What is the exercise value of the call option?

Exercise Value = Stock Price – Exercise Price
= $50 - $55
Exercise Value = $5

B. What is the premium on the option?

Premium Value = Market Price – Exercise Value
= $2 -$5
Premium Value = -$3

Problem 2
The exercise price on one of Flanagan Company’s call option is $15, its exercise value
is $22 and its premium is $5.  What are the option’s market value and the stock’s
current price?

Call option = $15

Exercise Value = $22
Time Value = $5

Market Value = Exercise Value + Time Value

V = $22 + $5
Market Value = $27

Stock Price = Call Option + Exercise Value

Po = $15 + $22
Stock Price = $37