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Assume that you hold a call option on stock A. The call has a strike price of 50 and expires in 6 months. Stock A

Assume that you hold a call option on stock A. The call has a strike price of 50 and expires in 6 months. Stock A pays no dividends.

  1. What is the payoff from the call if stock A is trading at 57 in 6 months?
  2. What is the payoff from the call if stock A is trading at 45 in 6 months?
  3. Draw a payoff diagram that shows the payoff of the call as a function of the underlying stock price.

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