What is the investor's total payoff (in dollars) in case the Meta stock price on the...

  

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What is the investor's total payoff (in dollars) in case the Meta stock price on the note expiration date is $50? 2. What is the investor's total payoff (in dollars) in case the Meta stock price on the note expiration date is $200? After the purchase of the zero-coupon bond, the remainder of the $100 invested in the note is used to purchase as many 5-year at-the-money call options on the Meta stock as possible. This is a call option with strike price equal to the current stock price of Meta, $100, and expiration date coinciding with the expiration date of the note. The market price, premium, today of such call option $31.40. Assume that the option can be bought in fractional amounts (i.e. one can purchase, say, 0.798 option) When note expires (5 years from today), the investor receives her payoff. The payoff is the sum of the par value payment from the zero-coupon bond plus any payoff from the call options. What is the investor's total payoff (in dollars) in case the Meta stock price on the note expiration date is $50? 2. What is the investor's total payoff (in dollars) in case the Meta stock price on the note expiration date is $200? After the purchase of the zero-coupon bond, the remainder of the $100 invested in the note is used to purchase as many 5-year at-the-money call options on the Meta stock as possible. This is a call option with strike price equal to the current stock price of Meta, $100, and expiration date coinciding with the expiration date of the note. The market price, premium, today of such call option $31.40. Assume that the option can be bought in fractional amounts (i.e. one can purchase, say, 0.798 option) When note expires (5 years from today), the investor receives her payoff. The payoff is the sum of the par value payment from the zero-coupon bond plus any payoff from the call options.

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To calculate the investors total payoff in each scenario we need to consider the payoff from the zer... View the full answer