Corporate Finance
Corporate Finance
3rd Edition
ISBN: 9780132992473
Author: Jonathan Berk, Peter DeMarzo
Publisher: Prentice Hall
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Chapter 20, Problem 8P

You own a put option on Ford stock with a strike price of $10. The option will expire in exactly six months’ time.

  1. a. If the stock is trading at $8 in six months, what will be the payoff of the put?
  2. b. If the stock is trading at $23 in six months, what will be the payoff of the put?
  3. c. Draw a payoff diagram showing the value of the put at expiration as a function of the stock price at expiration.
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You own a call option on Intuit stock with a strike price of $34. When you purchased the option, it cost $6. The option will expire in exactly three months' time. a. If the shares are trading at $43 in three months, what will be the payoff of the call? What will be the profit of the call? b. If the shares are trading at $31 in three months, what will be the payoff of the call? What will be the profit of the call? c. Draw a payoff diagram showing the value of the call at expiration as a function of the share price at expiration. d. Redo (c), but instead of showing payoffs, show profits. a. The payoff of the call is $ (Round to the nearest dollar.) and the profit of the call is $
Bha
Assume that you hold a call option on stock A. The call has a strike price of 50 and expires in 6 months. Stock A pays no dividends. 1. What is the payoff from the call if stock A is trading at 57 in 6 months? 2. What is the payoff from the call if stock A is trading at 45 in 6 months? 3. Draw a payoff diagram that shows the payoff of the call as a function of the underlying stock price.

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Corporate Finance

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