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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solve all four from a to d
![You shorted a call option on Intuit stock with a strike price of $30. When you sold (wrote) the option, you received $3. The option will expire in exactly three months' time.
a. If the stock is trading at $36 in three months, what will your payoff be? What will your profit be?
b. If the stock is trading at $23 in three months, what will your payoff be? What will your profit be?
c. Draw a payoff diagram showing the payoff at expiration as a function of the stock price at expiration.
d. Redo c, but instead of showing payoffs, show profits.
a. The payoff of the short is $], and the profit of the short is $
(Round to the nearest dollar.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa95626c2-c90a-44bc-a423-ee585171f854%2Fac133314-3a7a-4877-8f7d-bd58603147d5%2Fhris945_processed.png&w=3840&q=75)
Transcribed Image Text:You shorted a call option on Intuit stock with a strike price of $30. When you sold (wrote) the option, you received $3. The option will expire in exactly three months' time.
a. If the stock is trading at $36 in three months, what will your payoff be? What will your profit be?
b. If the stock is trading at $23 in three months, what will your payoff be? What will your profit be?
c. Draw a payoff diagram showing the payoff at expiration as a function of the stock price at expiration.
d. Redo c, but instead of showing payoffs, show profits.
a. The payoff of the short is $], and the profit of the short is $
(Round to the nearest dollar.)
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