You own a put option on Ford stock with a strike price of $14. When you bought the put, its cost to you was $2. The option will expire in exactly six months' time. a. If the stock is trading at $9 in six months, what will be the payoff of the put? What will be the profit of the put? b. If the stock is trading at $25 in six months, what will be the payoff of the put? What will be the profit of the put? c. Draw a payoff diagram showing the value of the put 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 put is $, and the profit of the put is $. (Round to the nearest dollar.)
You own a put option on Ford stock with a strike price of $14. When you bought the put, its cost to you was $2. The option will expire in exactly six months' time. a. If the stock is trading at $9 in six months, what will be the payoff of the put? What will be the profit of the put? b. If the stock is trading at $25 in six months, what will be the payoff of the put? What will be the profit of the put? c. Draw a payoff diagram showing the value of the put 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 put is $, and the profit of the put is $. (Round to the nearest dollar.)
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 a,b,c and d please. round to nearest dollar
Transcribed Image Text:You own a put option on Ford stock with a strike price of $14. When you bought the put, its cost to you was $2. The option will expire in exactly six months' time.
a. If the stock is trading at $9 in six months, what will be the payoff of the put? What will be the profit of the put?
b. If the stock is trading at $25 in six months, what will be the payoff of the put? What will be the profit of the put?
c. Draw a payoff diagram showing the value of the put 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 put is $
(Round to the nearest dollar.)
and the profit of the put is $
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