A trader shorts one share of a stock index for 50 and buys a 60-strike European call
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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.
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Profit Name (A) 22.64 Floor 17.56 Floor (B) (C) (D) (E) -22.64 "Written" Covered Call 22.64 Cap 17.56 Cap
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