1. Consider a call option for the Intel stock with the exercise price of $20. Today is the expiration date.
If the stock price is $21.50 today, what is the current value of the option?
2. Consider a put option for the Intel stock. The exercise price of the option is $20. If the stock price is
$21.50 today, the expiration date, what is the current value of the option?
3. Suppose that you bought the Intel stock at $21.50 per share, and that you paid $2 to buy its put
option with the strike price of $20. It the stock price is $30 on the expiration date, what is the
total profit per share from the investment?
4. ABC Company recently issued two types of bonds. The first issue consisted of 20-year straight debt
with an 8 percent annual coupon. The second issue consisted of 20-year bonds with a 6 percent annual
coupon and attached warrants. Both issues sold at their $1,000 par values. What is the implied value
of the warrants attached to each bond?
5. Consider a company’s 15 year, 9% coupon convertible bond with a $1,000 par value and the
conversion ratio of 40. Its current price is $950, and its equivalent regular coupon bond yields 12%.
These bonds are annual bonds. What is the value of the call option embedded in the convertible bond?
