(b) Consider the following investment: you buy 1 share of the Call Option of GameCock stock...

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(b) Consider the following investment: you buy 1 share of the Call Option of GameCock stock at $1 and 1 share of the Put Option of GameCock stock at $2 from Taylor Swift. The strike price for both the call option and the put option is $20. (1) What is your payoff and profit if the stock price goes down to $15 at expiration? What is your return on this investment? (6 points) (2) Draw the stock price your payoff and profit relationship on a graph (like those covered in class) (4 points) (3) What is Taylor Swift's profit in dollar terms if the stock price goes up to $22 at expiration? (5 points) (4) What is your maximum loss in dollar terms? (3 points) (b) Consider the following investment: you buy 1 share of the Call Option of GameCock stock at $1 and 1 share of the Put Option of GameCock stock at $2 from Taylor Swift. The strike price for both the call option and the put option is $20. (1) What is your payoff and profit if the stock price goes down to $15 at expiration? What is your return on this investment? (6 points) (2) Draw the stock price your payoff and profit relationship on a graph (like those covered in class) (4 points) (3) What is Taylor Swift's profit in dollar terms if the stock price goes up to $22 at expiration? (5 points) (4) What is your maximum loss in dollar terms? (3 points)

Answer rating: 100% (QA)

1 If the stock price goes down to 15 at expiration For the call option The option will expire worthl... View the full answer