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Please help me with all of that questions please c) Construct the payoff and profit graphs for the combined stock + put portfolio. d) Sarah
Please help me with all of that questions please
c) Construct the payoff and profit graphs for the combined stock + put portfolio. d) Sarah takes the same amount of cash as Farid in a) and instead buys the 95 strike call and saves the rest (earning interest at rate r). Construct the payoff and profit graphs for her call option. e) Is there any scenario where Farid's portfolio outperforms Sarah's? Where Sarah's portfolio outperforms Farid's? Q2) Start with $0 in your account (ignore margin requirements!). a) Short 1 share of XYZ at $100 and use some of the cash to buy a 100 strike call, investing the rest for 3 months at interest rater. How much cash do you have to invest? b) Construct profit and payoff graphs for this position (short stock + long call option) (ignoring stock borrow fees!).. c) Instead (starting with $0 in your account), borrow enough cash to buy the 100 strike put. You will pay interest on the loan at 1% for 3 months. Construct profit and payoff graphs for this put option. d) How do your graphs from b) and c) compare? e) How does your answer to b) change if you include a stock borrow fee of 0.25% on the $100 of XYZ stock you borrowed? (Assume the stock borrow fee is paid at the end of the 3 month period,) Q3) Construct profit and payoff diagrams for the following: a) Long a 105 strike straddle. b) Short a 95 strike straddle. c) Combine a) and b) in a single portfolio. c) Construct the payoff and profit graphs for the combined stock + put portfolio. d) Sarah takes the same amount of cash as Farid in a) and instead buys the 95 strike call and saves the rest (earning interest at rate r). Construct the payoff and profit graphs for her call option. e) Is there any scenario where Farid's portfolio outperforms Sarah's? Where Sarah's portfolio outperforms Farid's? Q2) Start with $0 in your account (ignore margin requirements!). a) Short 1 share of XYZ at $100 and use some of the cash to buy a 100 strike call, investing the rest for 3 months at interest rater. How much cash do you have to invest? b) Construct profit and payoff graphs for this position (short stock + long call option) (ignoring stock borrow fees!).. c) Instead (starting with $0 in your account), borrow enough cash to buy the 100 strike put. You will pay interest on the loan at 1% for 3 months. Construct profit and payoff graphs for this put option. d) How do your graphs from b) and c) compare? e) How does your answer to b) change if you include a stock borrow fee of 0.25% on the $100 of XYZ stock you borrowed? (Assume the stock borrow fee is paid at the end of the 3 month period,) Q3) Construct profit and payoff diagrams for the following: a) Long a 105 strike straddle. b) Short a 95 strike straddle. c) Combine a) and b) in a single portfolioStep by Step Solution
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