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8 and 9 please. will give thumbs up Use the following information to complete questions 8-10. The annual risk free interest rate is 5.0625%. All
8 and 9 please. will give thumbs up
Use the following information to complete questions 8-10. The annual risk free interest rate is 5.0625%. All stocks mentioned do not pay a dividend. All options mentioned are European style. The current spot price of Southwest Airlines (LUV) is 60.00. The forward price for a 6 month forward contract on Southwest Airlines is 61.50. You have the following premiums for European style calls on Southwest Airlines (LUV) which expire in 6 months: Strike Call Premium Put Premium 57 6.20 1.81 60 3.80 2.34 63 2.65 4.11 8. a. Create a payoff-profit table for a Long Straddle on LUV stock. For the table, use spot prices in 6-months from 50 to 70 in increments of 2. b. What is the maximum risk of this position? What is the maximum reward of this position? d. What is the upside break even spot price? e. What is the downside break even spot price? 9. Create a payoff-profit table for a Long Strangle on LUV stock. For the table, use spot prices in 6-months from 50 to 70 in increments of 2. b. What is the maximum risk of this position? c. What is the maximum reward of this position? d. What is the upside break even spot price? e. What is the downside break even spot priceStep by Step Solution
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