Question: Please select the right answer and explain. Please also show the calculation in Excel The spot price of Sainsbury stock is 50 per share. You

Please select the right answer and explain. Please also show the calculation in Excel

The spot price of Sainsbury stock is 50 per share. You purchase a call option and option written on 1 share of Sainsbury stock with the same strike price of 50. You pay a total of the two options. Which of the following statements are correct regarding your options portfolio.

The options portfolio is more profitable if the stock price increases to 100 at expiry compared to when the stock price drops to 0 at expiry

The breakeven points of the portfolio are when the stock price increases to 55 or drops to 45 at expiry.

The options portfolio loses the maximum amount of money if the spot price remains constant till expiry.

None of these is correct

Regardless of the stock price at expiry, at least one of the options will give possible cashflow when executed

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 Accounting Questions!

Please select the correct answer and explain why it is the correct answer. [1] GAAP applying to earnings per share require Restatement of EPS data of a prior period if the earnings of the prior...

I am confusing filling out the 6 tables! please help me to fill them out and also the excel calculation process! ACCY 303 Group Project: Constructive Capitalization of Operating Leases The purpose of...

Hi I need answers immediately. Attached is a file. I need the detailed solutions (no excel, can be typed or handwritten) to the long answer portions ONLY. Please read instructions for rounding rules....

This is done on excel. The requirements are the instructions in green box. The information they give you is the transaction data for 2018 and the Trial balance. The instructions want you to use the...

I need verification if my answers are right see page 14 of sample final and attached picture. Did I do it right or is the hedging options column wrong? UNIVERSITY OF MANITOBA Faculty of Management...

Please answer following questions in "hedging Assignment" and record answers in Excel, also show the calculation process in another paper. Portfolio Stock Put at K=50 Call at K=60 Instrument Call Put...

HI! can you please answer the Long answer question #1, part h), on the attached file! Thank you very much UNIVERSITY OF MANITOBA Faculty of Management Department of Accounting and Finance Professors:...

Attached is a file. See page 14. I need answer for part d). Please read instructions for rounding rules. UNIVERSITY OF MANITOBA Faculty of Management Department of Accounting and Finance Professors:...

When Paul was born, his parents invested a principal of $3000 at 4.5% simple interest, paid annually. Today is Paul's 18th birthday. a. What is the accumulated value of the investment? b. What is...

Let 0 be an outer measure, and suppose that 0 (A) = 0 for some A ( (. Then show that 0 (A ( B) = 0 (B) for every B ( (.

Issued common stock in exchange for $ 1 3 , 0 0 0 cash. Received an invoice from the utilities company for electricity in the amount of $ 2 0 0 . 3 . Bank approved a loan and deposited $ 1 0 , 0 0 0...

During the month of February, Ayayai Corp. ' s employees earned wages of $ 1 0 4 , 0 0 0 . Withholdings related to these wages were $ 7 , 9 5 6 for FICA, $ 2 2 , 0 1 0 for federal income tax, and $ 5...