Consider a protective put, which is a combination of a long stock and a long put...
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Consider a protective put, which is a combination of a long stock and a long put on the stock. Here are the put option's parameters. K, X T The put's strike price 6.00 0.5 time to expiration, in years. The stock has the following properties. So 6.00 current stock price 45% volatility of stock's rate of return The risk-free rate equals 6%. 6% What is the premium of the put? 5.70 ST Assume that the expiration date stock price is 5.70. What is the stock's expiration date payoff? What is the put's expiration date payoff? For the portfolio of stock plus protective put, what is the portfolio's expiration date payoff? What is the profit of the stock? What is the profit of the put? What is the profit of the portfolio: stock plus long put? Consider a protective put, which is a combination of a long stock and a long put on the stock. Here are the put option's parameters. K, X T The put's strike price 6.00 0.5 time to expiration, in years. The stock has the following properties. So 6.00 current stock price 45% volatility of stock's rate of return The risk-free rate equals 6%. 6% What is the premium of the put? 5.70 ST Assume that the expiration date stock price is 5.70. What is the stock's expiration date payoff? What is the put's expiration date payoff? For the portfolio of stock plus protective put, what is the portfolio's expiration date payoff? What is the profit of the stock? What is the profit of the put? What is the profit of the portfolio: stock plus long put?
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