Suppose that Wal-Mart current stock price is $100, and that you think a year from now the probability of the share price being $85, $110, and $130 is 30%, 60% and 10% respectively. A call option expiring in one year has an exercise price of $100 and is selling at $10. A put option expiring in one year has an exercise price of $100 and is selling at $5. Another call option expiring in one year has an exercise price of $120 and is selling at $2.  With $15,000 to invest, Find the highest expected profit?

Answer rating: 100% (QA)

To find the highest expected profit we need to calculate the expected profit for each investment opt... View the full answer