Mathematical work or handwritten solution please You are given the following information The current price to buy one share of XYZ stock is 1000 The stock does not pay dividends The risk free rate, compounded continuously, is 3 European options on one share of XYZ stock expiring in one year have the following prices Strike Price Call Option Price Put Option Price 990 15 63 1 24 1000 7 80 2 93 1010 3 17 7 81 You buy a butterfly option spread long one 990 put, short one 1000 put, short one 1000 call, long one 1010 call There are no transaction costs In one year, stock price is 1006 Calculate the amount of money the investor has immediately after expiration rate, assuming that there are no taxes or transaction costs, and any cash is always invested or borrowed at the risk free rate

The Answer is in the image, click to view ...

Question: Mathematical work or handwritten solution please: You are given the following information: The current price to buy one share of XYZ stock is 1000. The

Mathematical work or handwritten solution please:

You are given the following information:

The current price to buy one share of XYZ stock is 1000.

The stock does not pay dividends.

The risk-free rate, compounded continuously, is 3%.

European options on one share of XYZ stock expiring in one year have the following prices:

Strike Price	Call Option Price	Put Option Price
990	15.63	1.24
1000	7.80	2.93
1010	3.17	7.81

You buy a butterfly option spread: long one 990 put, short one 1000 put, short one 1000 call, long one 1010 call. There are no transaction costs. In one year, stock price is 1006. Calculate the amount of money the investor has immediately after expiration rate, assuming that there are no taxes or transaction costs, and any cash is always invested or borrowed at the risk-free rate

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Consider a diffusion couple between silver and a gold alloy that contains 10 wt% silver. This couple is heat treated at an elevated temperature and it was found that after 850 s the concentration of...

Please provide steps. Thx! Question 1 1/1 pts Jafee Corp. common stock is priced at $36.50 per share. The company just paid its $0.50 quarterly dividend. The continuously compounded risk free annual...

Q give answers Consider a two-period small open economy populated by a large number of identical households with preferences described by the utility function lnCT 1 + lnCN 1 + lnCT 2 + lnCN 2 where...

4ANSWER 1. Determine which statement about zero-cost purchased collars is FALSE (A) A zero-width, zero-cost collar can be created by setting both the put and call strike prices at the forward price....

help here Question 1 Let an individual's utility function be given as u(x1, x2) = 2 p x1 x2 . a) Compute the Marginal Rate of Substitution. b) Initially, the individual consumes bundle (x1 =100, x2...

solve the following questions... wel explained answers 2. For each of the following, illustrate the shift of one of the curves in the AS/AD model: a Business confidence rises as firms expect an...

address all Suppose an individual's wage (W) depends on their years of schooling (S) and their years of labour market experience (E). Both schooling and experience have a positive effect on wages but...

You are buying a stock today, and intend to hold it for 11 days. The stock prices changes everyday, and it has equal chance to go up or down Questions: a- What is the probability that the sock price...

You are given the following information: The current price to buy one share of XYZ stock is 500. The stock does not pay dividends. The risk-free interest rate, compounded continuously, is 6%. A...

Suppose you are getting ready to seed a new forage pasture. You need to determine how many lbs per acre to set your seeding rate. Based on your past experience, you were able to determine the...

A mass m is attached to the end of a spring with spring constant k on a frictionless horizontal surface. The mass moves in circular motion of radius R and period T. Due to the centrifugal force, the...

Carambola will generate a free cash flow of 1 4 million Honduran lempiras ( Lp ) next year ( 2 0 2 2 ) , and that this free cash flow will continue to grow at a constant rate of \ ( 8 . 5 \ % \ ) per...

Which of the following are problems with identifying users of ABC? Multiple select question. ABC means different things to different organizations. Organizations will announce the discontinuance of...

You have just received a letter from a customer who purchased new rims for his car from your tire store several months ago. He paid for the rims when he ordered them because they were a special...

Teamwork. Technology.Work with one other student to search the Internet for information on how e-mail, instant messaging, and blogs have affected writing skills, including tone or voice, spelling,...

Revise and edit the following message so that it communicates more clearly and concisely to an American receiver with an average reading level (Objectives 2 and 3): I recently was petitioned to...