Exercise Price Homework Help

Exercise Price

The exercise price on the date of expiration has a negative influence on the value of a call option that is, the value of Co is negatively related to E, the higher the value of E, the lower is the value of Co and vice-versa. Assuming other factors constant and the value of E increases to Rs 132. the value of Co decreases to Rs 1.68 (i.e. Rs 125 - Rs 123.42, PV of Rs 132 * 0.935).

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OPTION VALUATION

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