QUESTION 8

1. Suppose you purchase 10 call contracts on MT stock. the strike price is 60 and the premium was $3. If at expiration the stock price is $64, what are your call options worth? What is your net profit?

   		$4000; $1000
   		$3200; $800
   		$0 ; -$3000
   		$1000; -$1000

10 points

QUESTION 9

1. Suppose you write 15 put option contracts with a strike price of $45. The premium is $2.4. Evaluate your position at expiration if the stock price moves to $35, $55?

   		-$11,400; $3,600
   		-$15000; $3,600
   		-$3,600 ; $15000
   		-$3,600 ; $ 11,400

10 points

QUESTION 10

1. Assume the project 2 portfolio is worth $10 million and has a beta of 1.2. What type of option will you choose to hedge this portfolio?

   		Straddle option
   		Call option
   		Covered Call option
   		Put option