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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
You have purchased a call option on Johnson & Johnson common stock. The option has an exercise price of $57.50 and J & J’s stock currently trades at $58.93. The option premium is $2.17 per contract.
a. Calculate your net profit on the option if J & J’s stock price rises to $62.50 and you exercise the option.
b. Calculate your net profit on the option if J & J’s stock price falls to $58.00 and you exercise the option.
c. If J & J’s stock price falls to $58.00 show that it is more profitable to exercise than not exercise the option you have purchased.
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