. Graph the following positions at expiration, putting combined profit of the position on the vertical...
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. Graph the following positions at expiration, putting combined profit of the position on the vertical axis and stock price at expiration on the horizontal axis. Be sure to label your graph, indicating a) the exact stock price at which each kink occurs, b) the slope of each line segment, and c) the exact height of at least one portion of the graph. Be sure to account for the interest cost of each position when you compute profit. The options have one year to expiration, the interest rate is 10% per annum with annual compounding, the current stock price is $100, and the stock pays no dividends. Here are the option prices Strike 80 100 120 Calls 29.15 16.49 8.44 1.88 7.40 17.53 Puts (a) Short stock, long forward contract Profit is zero everywhere once interest is taken into account. . Graph the following positions at expiration, putting combined profit of the position on the vertical axis and stock price at expiration on the horizontal axis. Be sure to label your graph, indicating a) the exact stock price at which each kink occurs, b) the slope of each line segment, and c) the exact height of at least one portion of the graph. Be sure to account for the interest cost of each position when you compute profit. The options have one year to expiration, the interest rate is 10% per annum with annual compounding, the current stock price is $100, and the stock pays no dividends. Here are the option prices Strike 80 100 120 Calls 29.15 16.49 8.44 1.88 7.40 17.53 Puts (a) Short stock, long forward contract Profit is zero everywhere once interest is taken into account.
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The graph of the combined position short stock long forward is a horizontal line at the profit level of 0 across all stock prices at expiration There are no kinks in this graph because the profit does ... View the full answer
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date:
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