(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)
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Answer rating: 100% (QA)
1 If the stock price remains at 52 your payoff and profit from call option would be zero since the s... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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