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3. An investor buys 500 shares of ABC stock at $17 a share. He sells 5 call contracts (100 shares 0% each) with a striking
3. An investor buys 500 shares of ABC stock at $17 a share. He sells 5 call contracts (100 shares 0% each) with a striking price of $17.50 and premium of $2 a share. Assulne interest r annual effective. (a) Draw a time diagram. What is the investor's initial investment? (b) What will be the investor's profit at expiration if the spot price of the stock is $17? (c) What will be the investor's profit at expiration if the spot price of the stock is S18 if the calls are exercised? (d) What will be the investor's profit at expiration if the spot price of the stock is S16 and the investor sells his shares
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