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PLEASE ANSWER ALL PARTS Draw the profit diagrams at maturity for the following portfolios consisting of options. Clearly label all the important points in the
PLEASE ANSWER ALL PARTS
Draw the profit diagrams at maturity for the following portfolios consisting of options. Clearly label all the important points in the diagrams. a. Sell a one-year European call option with a strike of $22 and buy a one-year European put option with a strike of $16. Both options are trading at $1. (8 points) b. Execute the transactions in part (a) but now also buy the underlying stock trading at $20. (8 points) Draw the profit diagrams at maturity for the following portfolios consisting of options. Clearly label all the important points in the diagrams. a. Sell a one-year European call option with a strike of $22 and buy a one-year European put option with a strike of $16. Both options are trading at $1. (8 points) b. Execute the transactions in part (a) but now also buy the underlying stock trading at $20. (8 points)Step by Step Solution
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