INVESTMENTS(LL)W/CONNECT
INVESTMENTS(LL)W/CONNECT
11th Edition
ISBN: 9781260433920
Author: Bodie
Publisher: McGraw-Hill Publishing Co.
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Chapter 20, Problem 21PS

a

Summary Introduction

To draw: A graph showing the portfolio’s value as on expiration date.

Introduction:

Payoff graph: It is supposed to be a graphical representation of the potential outcomes of a strategy. The vertical axis depicts the profit/loss on options expiration day while the horizontal axis depicts the underlying asset price on the expiration day.

b

Summary Introduction

To draw: A graph showing the portfolio’s profit and compare the cost of the options.

Introduction:

Outlay cost: When a strategy is being executed, some costs are incurred. These costs can be termed as outlay costs. Outlay costs are incurred even when some assets are being purchased. As they are paid to the vendors, they can be easily recognized and measured in terms of money.

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