Question

Please use the back of the page if you need additional space to write or sketch. Question #1 (Max. Marks-8-4+4) Suppose in June 2011 Nijmegen Investments writes a December 2011 option to BUY 100 shares of ABC International with strike price of $20 per share exercisable only at maturity. The option price is $0.8 per share. In December the spot price of the ABC International Share is $26. 1. What kind of option is it? 2. Is the option in-the-money? Why or why not? Answer:

          Please use the back of the page if you need additional space to write or sketch.
Question #1 (Max. Marks-8-4+4)
Suppose in June 2011 Nijmegen Investments writes a December 2011 option to BUY 100 shares of ABC
International with strike price of $20 per share exercisable only at maturity. The option price is $0.8 per
share. In December the spot price of the ABC International Share is $26.
1. What kind of option is it?
2. Is the option in-the-money? Why or why not?
Answer:

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Please use the back of the page if you need additional space to write or sketch.
Question #1 (Max. Marks-8-4+4)
Suppose in June 2011 Nijmegen Investments writes a December 2011 option to BUY 100 shares of ABC
International with strike price of 20 per share exercisable only at maturity. The option price is0.8 per
share. In December the spot price of the ABC International Share is 26.
1. What kind of option is it?
2. Is the option in-the-money? Why or why not?
Answer:

Added by Purificaci-N C.

Horngren’s Cost Accounting

Srikant M. Datar, Madhav V. Rajan 16th Edition

Instant Answer

Solved by Expert Donna Densmore

Step 1

The intrinsic value is the difference between the spot price and the strike price. In this case, the spot price is $26.2 and the strike price is $20. So, the intrinsic value is $26.2 - $20 = $6.2. Show more…

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Please use the back of the page if you need additional space to write or sketch. Suppose in June 2011, Nijmegen Investments writes a December 2011 option to BUY 100 shares of ABC International with a strike price of $20 per share, exercisable only at maturity. The option price is $0.8 per share. In December, the spot price of the ABC International Share is $26.2. Is the option in-the-money? Why or why not? What kind of option is it? Answer:

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