Question
Problem 28-06 The price of a stock is $25. A put option to sell that stock at $26 is currently selling for $4. You buy
Problem 28-06
The price of a stock is $25. A put option to sell that stock at $26 is currently selling for $4. You buy the stock and the put. Complete the following table and answer the questions. Round your answers to the nearest dollar. Use a minus sign to enter negative values, if any. If the answer is zero, enter "0".
Price of the stock | Profit on stock | Profit on put | Net profit | ||
$18 | $ | $ | $ | ||
22 | $ | $ | $ | ||
26 | $ | $ | $ | ||
30 | $ | $ | $ | ||
34 | $ | $ | $ | ||
42 | $ | $ | $ |
- What is the maximum possible profit on the position?
The maximum possible profit is a) unlimited b) 6 c)15 d)17
- What is the maximum possible loss on the position? Enter your answer as a positive value.
$ ___ ?
- What is the range of stock prices that generates a profit?
The position generates a profit as long as the price of the stock exceeds $ ____ ?
- What advantage does this position offer? Enter your answer as a positive value. Round your answer to the nearest dollar.
The investor limits the a)net profit b) net loss to a) not more than b) not less than $ ____ ?
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