Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A-9: Call option
On March 1, 2022, Jensen Corp. purchased a call option on shares of YTV stock. The contract was for 100 shares at a strike price of $90 per share, with an
expiration date of May 31, 2022. The option contract premium was $50. On March 31, a market appraisal estimated the time value of the option to be $40.
Jensen settled the option contract on May 10. Prices of YTV stock during the option period are provided below.
March 1
May 10
$85
Price of YTV stock:
$90
March 31
$80
At what amount would Jensen report as the value of the call option in its March 31, 2022 balance sheet?
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