The stock will be either $68 or $90 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 6 percent.
a. Suppose the current price of the company's stock is $79. What is the value of the call option if the exercise price is $64 per share? (32.16.)
Call value $
b. Suppose the current price of the company's stock is $79. What is the value of the call option if the exercise price is $74 per share? (32.16.)
Call value $