Remark: No hand written, Pls do in typing format.

Question 5.

1. Assume you purchase 100 units of Xynavane share at RM105 per share. To protect your investment, your remisier advise you to also purchase an option as back up. Since share prices fluctuates all the times, and you scared risking your total investment, you agreed to the remisiers suggestion and proceed to buy the option at a strike price of RM105 per share. The option has an expiration date of 30 days and you pay RM600 as the premium.

1. Calculate the total cost of your shares. (2 marks)
2. Identify the type of option that you should purchase. (2 marks)
3. Assume the price of the shares goes up to RM127 per shares:

1. Decide on your option exercise right. (2 marks)
2. Calculate the net profit / (loss) from the above investment. (2 marks)

4. Assume the price of the shares goes down to RM97 per shares.

1. Decide on your option exercise right. (2 marks)
2. Calculate the net profit / (loss) from the above investment. (2 marks)