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Q 5 . Draw a payoff diagram of a when you a ) buy a call option with strike price 1 0 . What is

Q5. Draw a payoff diagram of a when you
a) buy a call option with strike price 10. What is the value of the option at maturity if
the value of the underlying stock is 12?
b) buy a put option with strike price 10. What is the value of the option at maturity if the
value of the underlying stock is 12?
c) sell a call option with strike price 10.
d) sell a put option with strike price 10.
e) For each diagram (a) and (b) above, indicate where the option is in-the-money, at-the-
money, and out-of-the-money.
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