A collar is established by buying a share of stock for $61, buying a six-month put option with exercise price $55, and writing a six- month call option with exercise price $65. Based on the volatility of the stock, you calculate that for an exercise price of $55 and maturity of six months, N(d₁) = 0.7106, whereas for the exercise price of $65, N(d₁) = 0.6510. Required: What will be the gain or loss on the collar if the stock price increases by $1? (Input the amount as a positive value. Do not round intermediate calculations and round your answer to 3 decimal places.) of
A collar is established by buying a share of stock for $61, buying a six-month put option with exercise price $55, and writing a six- month call option with exercise price $65. Based on the volatility of the stock, you calculate that for an exercise price of $55 and maturity of six months, N(d₁) = 0.7106, whereas for the exercise price of $65, N(d₁) = 0.6510. Required: What will be the gain or loss on the collar if the stock price increases by $1? (Input the amount as a positive value. Do not round intermediate calculations and round your answer to 3 decimal places.) of
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
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Transcribed Image Text:A collar is established by buying a share of stock for $61, buying a six-month put option with exercise price $55, and writing a six-
month call option with exercise price $65. Based on the volatility of the stock, you calculate that for an exercise price of $55 and
maturity of six months, N(d₁) = 0.7106, whereas for the exercise price of $65, N(d₁) = 0.6510.
Required:
What will be the gain or loss on the collar if the stock price increases by $1? (Input the amount as a positive value. Do not round
intermediate calculations and round your answer to 3 decimal places.)
of
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