A trader shorts one share of a stock index for 50 and buys a 60-strike European call
Question:
A trader shorts one share of a stock index for 50 and buys a 60-strike European call option on that stock that expires in 2 years for 10. Assume the annual effective risk-free interest rate is 3%. The stock index increases to 75 after 2 years. Calculate the profit on your combined position, and determine an alternative name for this combined position.
Transcribed Image Text:
Profit Name (A) 22.64 Floor 17.56 Floor (B) (C) (D) (E) -22.64 "Written" Covered Call 22.64 Cap 17.56 Cap
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 100% (1 review)
B A position consisting of a short asset position a...View the full answer
Answered By
Elias Gichuru
am devoted to my work and dedicated in helping my clients accomplish their goals and objectives,providing the best for all tasks assigned to me as a freelancer,providing high quality work that yields high scores.promise to serve them earnestly and help them achieve their goals.i have the needed expertise,knowledge and experience to handle their tasks.
4.80+
325+ Reviews
859+ Question Solved
Related Book For
Question Posted:
Students also viewed these Business questions
-
Last Sale Net Bid Ask Open Int Puts Last Sale Net bid Ask Vol Open Int 16Aug 155.00(1619H155-E) 6.45 0.75 6.95 7.25 9 16Aug 155.00(1619T155-E) 1.18 (0.75) 1.17 1.25 61 4505 16Aug 166.00(1619H160-E)...
-
26. With its current leverage, Impi Corporation will have net income next year of 4.5 million. If Impis corporate tax rate is 35% and pay 8% interest on its debt, how much additional debt can Impi...
-
To insure a stock portfolio against price decreases, owners of stock portfolios should a on the stock index? A call option with a strike price of Rs55 can be bought for Rs4. What will be your net...
-
We are given a number of darts. Suppose it is known that each time we throw a dart at a target, we have a probability of 1/4 of hitting the target. An experiment consists of throwing three darts at...
-
The following information is available for the Butler Company, which began operations in 2007: Required 1. Prepare the journal entries for 2007 and 2008. 2. Prepare a partial income statement and a...
-
1. Assume that during most of the year, there was a solid strip of land around the property in question that was never under water or saturated. Would the outcome of this case have been the same? Why...
-
Refer to the data for Cycle Guys in E5-31B. Requirements 1. Compute the cost of goods sold under FIFO. 2. Compute the cost of goods sold under LIFO. 3. Which method results in a higher cost of goods...
-
SpringFresh provides commercial laundry and dry cleaning services to local hospitals, hotels, and restaurants. Management believes that the dry cleaning business is a loser, even though dry cleaning...
-
QUESTION 1 71/76 Sam Hill has just won the state lottery, paying $250,000 a year for the next 30 years. Sam will receive his first payment today. If the interest rate is 8%, what is the present value...
-
You are selecting among various put options with different strike prices to hedge a long asset position. Which of the following statements is true? Give your reasoning. (A) Higher-strike puts cost...
-
You are given: (i) The current price of a stock is 70. (ii) The continuously compounded risk-free interest rate is 5%. (iii) The price of a 70-strike 1-year European call option is 5. (iv) The price...
-
Find how many six-digit numbers can be made from these sets of digits: a. 1, 1, 1, 1,1 and 3 b. 2, 2, 2, 7, 7 and 7 c. 5, 6, 6, 6, 7 and 7 d. 8, 8, 9, 9, 9 and 9.
-
Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor - hours. At the beginning of the year, it estimated that 3 1 , 0 0 0 direct labor - hours would...
-
Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $860. Selected data for the company's operations last year follow:...
-
Marketing has drastically changed since digital technologies are available. Identify core differences between the traditional (analogue) and digital marketing and articulate advantages and...
-
On June 1, 2023, JetCom Inventors Inc. issued a $490,000 7 % , three-year bond. Interest is to be paid semiannually beginning December 1, 2023. Required: a. Calculate the issue price of the bond...
-
Factor the following completely: 5x 2 2 - 25x + 30.
-
Describe the methods that might be used to disclose reportable segment information.
-
The outer loop controls the number of students. Note that the inner loop of this program is always executed exactly three times, once for each day of the long weekend. Modify the code so that the...
-
A depreciable asset costs $10,000 and has an estimated salvage value of $1600 at the end of its 6-year depreciable life. Compute the depreciation schedule for this asset by both SOYD depreciation and...
-
A million-dollar oil drilling rig has a 6-year depreciable life and a $75,000 salvage value at the end of that time. Determine which one of the following methods provides the preferred depreciation...
-
A new machine tool is being purchased for $16,000 and is expected to have a zero salvage value at the end of its 5-year useful life. Compute the DDB depreciation schedule for this capital asset....
-
After reviewing those stories, develop and share a proposal that you think would best promote diversity and inclusion within college coaching and administration. Your proposal should address...
-
As you will soon see, legal education is indispensable, no matter how you use your knowledge of the law. Assume that the author's statement, as you will see is an aside that is not central to the...
-
In 1956 behaviorist B. F. Skinner and humanistic psychologist Carl Rogers debated the issues of using what they had discovered about operant conditioning and learning to control human behavior....
Study smarter with the SolutionInn App