Question: What are the financial assets in this question? Please write their payoff matrix. Question 3 (20 marks) Consider an investor with $50 budget who has

What are the financial assets in this question? Please write their payoff matrix.

What are the financial assets in this question? Please write their payoff

Question 3 (20 marks) Consider an investor with $50 budget who has access to the stock that currently trades at $5 and who can buy or write call options on this stock. The investor is not affecting the price of the stock or the option by his deals. The call option is currently priced at $.5 (50 cents) and has the strike price of $6. Tomorrow the option expires and the investor believes that the stock will be priced either at $7 or at $4 with equal probabilities. Suppose further that the investor values his wealth y according to v(y) = Iny

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