Question
2. The current price of one share of RJC stock is 97.70. A call option on RJC stock with a strike price of 100 and
2. The current price of one share of RJC stock is 97.70. A call option on RJC stock with a strike price of 100 and two months to expiration has a price of 5.00. Joe has bought (long) 20 of these call options.The interest rate is 4%.At the end of two months, the price of one share of RJC stock is 108.00.
a. Calculate the profit Joe made from his investment. (5 points)
b. What must the price of the stock be at the end of two months such that that the profit on Joes investment is -30.00? (5 points)
c. If Joe bought (long) 20 put options (with a strike price of 100 and two months to expiration) instead of 20 call options, what would have been his total cost? (5 points)
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