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7. An investor creates a butterfly spread by trading 9-month call options with strike prices of $90, $100, and $110. The prices of the options
7. An investor creates a butterfly spread by trading 9-month call options with strike prices of $90, $100, and $110. The prices of the options are $12.50, $7.25, and $3.50, respectively. (Note: Total payoff does not include the initial investment.) a. What is the initial investment? b. What is the total payoff when the stock price in 9 months is 90? c. What is the total payoff when the stock price in 9 months is 100? d. What is the total payoff when the stock price in 9 months is 110? e. What is the profit/loss (P&L) when the stock price in 9 months is 94? f. What is the profit/loss (P&L) when the stock price in 9 months is 106? g. What is the profit/loss (P&L) when the stock price in 9 months is 124? 7. An investor creates a butterfly spread by trading 9-month call options with strike prices of $90, $100, and $110. The prices of the options are $12.50, $7.25, and $3.50, respectively. (Note: Total payoff does not include the initial investment.) a. What is the initial investment? b. What is the total payoff when the stock price in 9 months is 90? c. What is the total payoff when the stock price in 9 months is 100? d. What is the total payoff when the stock price in 9 months is 110? e. What is the profit/loss (P&L) when the stock price in 9 months is 94? f. What is the profit/loss (P&L) when the stock price in 9 months is 106? g. What is the profit/loss (P&L) when the stock price in 9 months is 124
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