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Please answer all parts will like and comment 6 Use the following information on ABC Co. to answer questions 16- 19. (Include any initial cash
Please answer all parts will like and comment
6 Use the following information on ABC Co. to answer questions 16- 19. (Include any initial cash flows in calculating net profits at maturity.) Puts APR. 2.75 MAY 5 Calls APR MAY 4 MAR 1.75 5.50 MAR 119 1/2 120 X 7 6 5.75 4 0.50 2 119 1/2 125 Assume that the price of ABC on the May expiration day is S122. (Include any initial cash flows in calculating net profit at maturity.) 16. A bear money (vertical) spread using the May calls would involve a. An initial cash outflow of $200 b. An initial cash inflow of $300 c. An initial cash inflow of $200 d. An initial cash outflow of $300 e. No initial cash flow 17.What is the net profit at maturity of the bear money spread of question 16? a, $0 b. Loss of $200 c. Gain of $200 d. Loss of $100 e. Gain of $100 18. You create a (long) straddle using the May maturity and the strike price of $120. What is the net profit at maturity? a. Loss of $1000 b. Loss of $1200 c. Gain of $1000 d. Gain of $1200 e. none of the above 19. The two breakeven stock prices at expiration for the straddle in question 18 are: a. $104 and $135 b. $118 and $121 c. $112 and $127 d.$108 and $132 e. none of the aboveStep by Step Solution
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