. Jean just had a long conversation with his broker. His broker convinced him to do...
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. Jean just had a long conversation with his broker. His broker convinced him to do the following initial transactions: buy a share of Alcan stock; borrow $97.59 to be repaid in 6 months at a rate of 5% per year (effective); and buy a put option on Alcan stock with E=$100 and expiration in 6 months. Jean's friend, Nancy, talked to her broker and she has decided to buy a call option on Alcan stock with E-$100 and expiration in 6 months. Use the tables below to determine the payoffs to Jean and Nancy's different strategies given different possible prices of Alcan's stock in 6 months. (Assume that both Jean and Nancy brokers charge no commissions.) Jean's Initial transactions buy stock borrow $97.59 buy put; E=$100 Jean's Combined Payoff of Above Components Nancy's Initial Transaction buy call; E-$100 Payoffs in 6 months given different stock prices ST = 40 ST = 80 ST=0 ST 120 ST 160 -55 25 65 105 -95 97.59 91 -6.59 0 -97.59 51 -97.59 11 -101.59 -61.59 0 -97.59 0 -32.59 - -97.59 0 7.41 Payoffs in 6 months given different stock prices ST=0 ST = 40 ST = 160 ST = 80 20 ST = 120 60 100 . Jean just had a long conversation with his broker. His broker convinced him to do the following initial transactions: buy a share of Alcan stock; borrow $97.59 to be repaid in 6 months at a rate of 5% per year (effective); and buy a put option on Alcan stock with E=$100 and expiration in 6 months. Jean's friend, Nancy, talked to her broker and she has decided to buy a call option on Alcan stock with E-$100 and expiration in 6 months. Use the tables below to determine the payoffs to Jean and Nancy's different strategies given different possible prices of Alcan's stock in 6 months. (Assume that both Jean and Nancy brokers charge no commissions.) Jean's Initial transactions buy stock borrow $97.59 buy put; E=$100 Jean's Combined Payoff of Above Components Nancy's Initial Transaction buy call; E-$100 Payoffs in 6 months given different stock prices ST = 40 ST = 80 ST=0 ST 120 ST 160 -55 25 65 105 -95 97.59 91 -6.59 0 -97.59 51 -97.59 11 -101.59 -61.59 0 -97.59 0 -32.59 - -97.59 0 7.41 Payoffs in 6 months given different stock prices ST=0 ST = 40 ST = 160 ST = 80 20 ST = 120 60 100
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The table you provided shows the payoffs for Jeans and Nancys investment strategies involving options on Alcan stock with different stock prices at ex... View the full answer
Related Book For
Organizational Behavior
ISBN: 978-0273774815
8th Edition
Authors: Andrzej A. Huczynski, David A. Buchanan
Posted Date:
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