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College Assignment: Financial Derivatives and Hedging Strategies

An assignment on financial derivatives, including their uses in hedging strategies in finance.

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College Assignment: Financial Derivatives and Hedging Strategies1.OptionsA call option on Bedrock Boulders stock has a market price of $9. The stock sells for $30 a share, andthe option has an exercise price of $25 a share.a. What is the exercise value of the call option? Round your answer to two decimal places.$________b. What is the premium on the option? Round your answer to two decimal places.$________Call option’s market price = $9; Stock’s price = $30; Option exercise price = $25.a.Exercise value= Current stock price–Exercise price= $30–$25= $5.00.b.Premium value= Option’s market price–Exercise value= $9–$5= $4.00.2.OptionsThe exercise price on one of Flanagan Company's options is $13, its exercise value is $22 and itspremium is $5.a. What is the option's market value? Round your answer to two decimal places.$________b. What is the price of the stock? Round your answer to two decimal places.$________Option’s exercise price = $13; Exercise value = $22; Premium value = $5; V = ? P0= ?Premium= Market price of option–Exercise value$5= V–$22V= $27.

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