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A wealthy financial advisor builds the following zero cost portfolio for you: One share of LOSR stock with a current price of 105. One short
- A wealthy financial advisor builds the following zero cost portfolio for you:
- One share of LOSR stock with a current price of 105.
- One short call option on LOSR with a strike price of 110, 1-year to maturity with a premium of 9.30
- One long put option on LOSR with a strike price of 100, 1-year to maturity, with a premium of 7.10
- Borrow 102.80 (short bond) to keep the total cost of the portfolio equal to zero.
The continuously compounded interest rate is 7.67%.
Determine the minimum and maximum profit of your portfolio after 1 year.
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Financial Markets And Corporate Strategy
Authors: Mark Grinblatt, Sheridan Titman
2nd Edition
0071157611, 9780071157612
