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Finance tutors, I need help!!! urgent! Please! Please Please Please Please Suppose that you are holding one share of stock A, which is currently 65

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Finance tutors, I need help!!! urgent! Please! Please Please Please Please

image text in transcribed
Suppose that you are holding one share of stock A, which is currently 65 per share. You have predicted that the price of stock A will end up at 4 possible prices at the end of this week. The possible prices and corresponding probability are shown in the following table: Future price of stock A (l Probability (96) 49.5 30 63.4 25 77.5 20 60.5 25 You believe that the stock A's price at the end of this week will not be far away from your forecasts. You want to act on the forecasts. Suppose that there are 6 types of European call option to buy one share of the stock A. The 6 types of option contract have different strike prices, but they all expire at the end of this week. There is no limitation to the number of each option contract to purchase/sell. The strike price and cost of each type of option can be found in the following table: European call option Strike price (28) Option cost () 1 40 6 2 45 8 3 55 10 4 60 7 5 65 5 6 35 9 i) Select proper options and design a buttery strategy to maximize the net prots based on your stock price forecasts. Draw a diagram for your net prot/loss from creating the buttery strategy. (9 marks) ii) Discuss the motivation for building the strategy. (7 marks)

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