Previously, you purchased a European call option on Parlicoot Inc shares. The option has just matured. The strike price on the option is 74.81, while the current stock price is 80.53. What is your payoff? O -5.72 O 5.72 O 0.00 O 1.08

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
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Previously, you purchased a European call option on Parlicoot Inc shares. The option has just matured. The strike price on the option is 74.81, while the current stock price is 80.53. What is your payoff?
-5.72
5.72
0.00
1.08
Transcribed Image Text:Previously, you purchased a European call option on Parlicoot Inc shares. The option has just matured. The strike price on the option is 74.81, while the current stock price is 80.53. What is your payoff? -5.72 5.72 0.00 1.08
Expert Solution
Step 1

Call option payoff is calculated using following equation

Call option payoff = Max(0,ST-K)

Where, ST is stock price at expiration time T

K is strike price

 

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