Suppose that a 3-month American call option that has an exercise price of $30 is selling at $5 and its underlying stock price is $20. a. Explain why investors are willing to buy this call option that has a negative exercise value. b. If this call option has a positive exercise value, investors may have a change to make arbitrage profits by exercising the option immediately after buying it. However, this is not likely to happen. Explain how the positive exercise value affects the option's price (premium)?
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