Question 1 A call option costing $6 and a put option costing $4 are available, both with a strike price of $60. You decide to purchase both together such that your total cost will be $10. Given this information; a) Complete the table below: Stock Price $45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 65 69 70 75 80 85 90 95 100 Intrinsic Value of the Call Call Profit Intrinsic Value of the Put Put Total Total Profit Payoff Profit b) Within what range of stock prices, will there be a loss? c) Plot a graph measuring the stock prices on the horizontal axis and total profit on the vertical axis
Question 1 A call option costing $6 and a put option costing $4 are available, both with a strike price of $60. You decide to purchase both together such that your total cost will be $10. Given this information; a) Complete the table below: Stock Price $45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 65 69 70 75 80 85 90 95 100 Intrinsic Value of the Call Call Profit Intrinsic Value of the Put Put Total Total Profit Payoff Profit b) Within what range of stock prices, will there be a loss? c) Plot a graph measuring the stock prices on the horizontal axis and total profit on the vertical axis
Chapter8: Financial Options And Applications In Corporate Finance
Section: Chapter Questions
Problem 8SP
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