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$28 Problem POS-18D Today is time 0. The following derivative securities, all on XYZ stock, are given: Security Strike (or delivery) price, denoted K Expiration
$28 Problem POS-18D Today is time 0. The following derivative securities, all on XYZ stock, are given: Security Strike (or delivery) price, denoted K Expiration Current price European call $25 Time T $6.25 European put $35 Time T $5.56 Forward contract Time T $2.62 (Thus the forward contract requires a down payment of $2.62.) Consider the following position: Sell the call, buy the put, and buy (take a long position in the forward contract. Questions: (a) Prepare a numerical table showing the payoff and the profit of the above position at expiration, under different scenarios. (See separate template. See also part (c) below.) (b) Use the numerical table to draw graphs for the position's payoff at expiration and for the profit at expiration. Mark all the important points. (See "guidance" document.) Also mark the slope for each segment. Complete: The profit at expiration is negative if the stock price at that time is in the range ........ The profit is positive if the stock price is in the range (c) Complete the following algebraic table showing the payoff and the profit of this position at expiration under different scenarios. Time-o Position Time-0 Value (payoff) at expiration? Security K unit price (Units) ST
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