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Call Options: Exercise Value and Premium

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A call option on company A stock has a market price of $7. The stock sells for $30 dollars a share, and the option has an exercise price of $25 a share.

1) What is the exercise value of the call option?

2) What is the premium on the option?

Please show calculations.

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Solution Summary

This solution provides guidelines on finding the exercise value and premium of a call option.

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Here is what you need to know about Call Options:

The buyer anticipates that the price will increase and will pay a premium that will never be ...

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