Homework: Assignment 5 Due Monday December 6 by 5pm

Question 11, Problem 13-5

Part 1 of 4

HW Score: 1.04%, 0.17 of 16 points

You have shorted a put option on Ford stock with a strike price of $13. When you sold (wrote) the put, you received $6. The option will expire in exactly six months' time.

a. If the stock is trading at $6 in six months, what will your payoff be? What will your profit be?

b. If the stock is trading at $23 in six months, what will your payoff be? What will your profit be?

c. Draw a payoff diagram showing the value of the put at expiration as a function of the stock price at expiration.

d. Redo c, but instead of showing payoffs, show profits.

(Round to the nearest dollar.)