Question: Question 18 & 19 are based on the following informatio Suppose you are contemplating buying a house for $160,000. Your current wealth is $140,000 and
Question 18 & 19 are based on the following informatio Suppose you are contemplating buying a house for $160,000. Your current wealth is $140,000 and you are unwilling to risk losing more than $20,000. A collar is established by (1) purchasing 2,000 shares of stock currently selling at $70 per share (2) purchasing 2,000 put options with exercise price $60 and (3) writing 2,000 calls with exercise price $80. Now, suppose at the option expiration, share price is $75 what is your payoff for the collar? O $150,000 o $160,000 O $140,000 O $120,000
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