Wednesday, August 11, 2010

What is the market value and price of the stock?

The exercise price on on of a company's options is $15, its exercise value is $22, and its time value is $5. What are the option's market value and the price of the stock?





I know the answer is $27.00 and $37.00 but can someone help to tell me how you get to these answers?What is the market value and price of the stock?
The options market value = exercise value + time value = $22 + $5 = $27.


The time value is the price you pay for the possibility that the stock will increase even more in value before the exercise date.





The price of the stock = exercise value + exercise price = $22 + $15 = $37 This is so because the exercise value is the value the option will have at the final exercise date when the time value is down to zero.

No comments:

Post a Comment