Question
An investor sells a European call on a share of $5. The stock price is $45 and the strike price is $52. Fill the table
An investor sells a European call on a share of $5. The stock price is $45 and the strike price is $52. Fill the table and answer (25 points)
| Stock price (ST) in the market | $35 | $40 | $45 | $47 | $50 | $52 | $55 | $60 |
| Option value (Pay off) |
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| Premium |
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| Profit |
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a) Under what circumstances does the investor make a profit?
b) Under what circumstances will the option be exercised?
c) What is the maximum loss an investor can incur?
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The New Retirementality Planning Your Life And Living Your Dreams At Any Age You Want
Authors: Mitch Anthony
4th Edition
1118705122, 978-1118705124
