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# The exercise price m a put option is $40 and the price of the underlying stock is $40. The option will expire in 55 days. The option is currently...

The exercise price m a put option is $40 and the price of the underlying stock is $40. The option will expire in 55 days. The option is currently selling for $0.50.

a.) Calculate the options exercise value

b.) Calculate the value of the premium over and above the exercise value? Why is an investor willing to pay more than the exercise value?

c.) Is this an out-of-the money, at the money option? why?

d.) What happens to the market price option if the underlying stock changes to $38? will the exercise value or the time value change? explain?