Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 20, Problem 7P

Assume that you have shorted the call option in Problem 6.

  1. a. If the stock is trading at $55 in three months, what will you owe?
  2. b. If the stock is trading at $35 in three months, what will you owe?
  3. c. Draw a payoff diagram showing the amount you owe at expiration as a function of the stock price at expiration.
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answer each part correctly PLEASE.
Both a call and a put currently are traded on stock XYZ; both have strike prices of $40 and expirations of 6 months. a. What will be the profit to an investor who buys the call for $5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place.) Stock Price i. $ ii. $ iii. $ iv. $ $ V. 8 GS G 4 40 45 50 55 60 Profit
Consider shorting a call option c on a stock S where S = 24 is the value of the stock, K = 30 is the strike price, T = ½ is the expiration date, r = 0.04 is the continuously compounded interest rate per year, and  = 0.3 is the volatility of the price of the stock. Determine the delta ratio Δ .

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