Question
Need help with the following homework A) Fill in the following payoff table (as a function of the stock price in 1 year) of a
Need help with the following homework
A) Fill in the following payoff table (as a function of the stock price in 1 year) of a portfolio that is (i) long one share of stock, (ii) long one 1-year put with an exercise price of $50, (iii) short one 1-year call with an exercise price of $60, (iv) short one 1-year call with an exercise price of $80, and (v) short a 1-year zero-coupon bond with a face amount of $40. B) Graph the payoff as a function of the stock price in 1 year. (Note: Payoff not profit, ignore the cost of these securities).
$30 $40 $50 $60 $70 $80 $90 $100 $110
Price
Long Stock
Long Put (x=50)
Short Call (X=60)
Short Call (X=80)
Short Bond (F=40)
Total Payoff
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