Basic Diagrams for Basic Securities:

Your boss wants you to create some charts to display the potential benefits of basic securities. For each portfolio, draw both a payoff and profit diagram.

1.The purchase of H&B stock, SH&B at $5.

2.The shorting of H&B stock, SH&B at $5.

3.The purchase and shorting of H&B stock, SH&B both at $5.

4. Explain why the graph in 3. has to look the way it looks.

5.Selling a bond for $X that has a face value of $2X.