Question 1 A call option costing $6 and a put option costing $4 are available, both with a strike price of $60. You decide to purchase both together such that your total cost will be $10. Given this information; a) Complete the table below: Stock Price $45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 65 69 70 75 80 85 90 95 100 Intrinsic Value of the Call Call Profit Intrinsic Value of the Put Put Total Total Profit Payoff Profit b) Within what range of stock prices, will there be a loss? c) Plot a graph measuring the stock prices on the horizontal axis and total profit on the vertical axis
Question 1 A call option costing $6 and a put option costing $4 are available, both with a strike price of $60. You decide to purchase both together such that your total cost will be $10. Given this information; a) Complete the table below: Stock Price $45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 65 69 70 75 80 85 90 95 100 Intrinsic Value of the Call Call Profit Intrinsic Value of the Put Put Total Total Profit Payoff Profit b) Within what range of stock prices, will there be a loss? c) Plot a graph measuring the stock prices on the horizontal axis and total profit on the vertical axis
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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Please answer B & C
Transcribed Image Text:Question 1
A call option costing $6 and a put option costing $4 are available, both
with a strike price of $60. You decide to purchase both together such that
your total cost will be $10. Given this information;
a) Complete the table below:
Stock
Price
$45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
65
69
70
75
80
85
90
95
100
Intrinsic
Value of
the Call
Call
Profit
Intrinsic
Value of
the Put
Total
Put Total
Profit Payoff Profit
b) Within what range of stock prices, will there be a loss?
c) Plot a graph measuring the stock prices on the horizontal axis and
total profit on the vertical axis
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