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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Corporate Finance

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