The payoff diagram of an investment strategy involving 3-year European put options on a stock is shown
Question:
The payoff diagram of an investment strategy involving 3-year European put options on a stock is shown below:
You are given:
(i)
(ii) The continuously compounded risk-free interest rate is 2.5%.
Calculate the maximum possible profit of this investment strategy .
Transcribed Image Text:
Payoff 20 25 30 40 50 3-year stock price
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