5. Which portfolio would you prefer to own?

Portfolio A: A risk free bond that will pay you $10,000 in 90 days

Portfolio B: Long position in 100 shares of IBM, long position in a put contract with a strike price of $100 and a short position in a call contract with a strike price of 100. The stock price is $105, the put is trading for $4.37 and the call is trading for $10.60.

#3
Note: 1 contract = 100 shares
				ST > X		ST < X
Portfolio A
Risk free bond				10,000		10,000
Portfolio B
100 shares				100*ST		100*ST
Long Put with strike of 100				0		100*(100-ST)
Short Call with strike of 100				-100*(ST-100)		0
Net for Portfolio B				10,000		10,000