Spring Semester 2019 Tuesday 19-February-2019 QUESTION #8 [Max. Marks = 12 = 6+6] Suppose that on October 9, 2013 the price of a share of Jumbo Airlines is AED 100. The option price of a European 2-year (exercise date October 8, 2015) call option on a share of Jumbo Airlines with stnke price AED 102 is 50 fills. Mr. Talha and Mr. Waleed are two investors who hold same amount of AED10.200 before entering into trades. Mr. Talha prefers to invest all the money in LONG Call options, while Mr. Waleed in determined to use whole amount of money to buy shares of Jumbo Airline. 1. What will be the payoffs of Mr. Talha and Mr. Waleed if the spot price of Jumbo's share changes to AED 105 on October 8, 2015. 2. What will be the difference between the payoffs of Mr. Talha and Mr. Waleed if the price of the share would be AED100 on October 8, 2015? Answer: Spring Semester 2019 Tuesday 19-February-2019 QUESTION #8 [Max. Marks = 12 = 6+6] Suppose that on October 9, 2013 the price of a share of Jumbo Airlines is AED 100. The option price of a European 2-year (exercise date October 8, 2015) call option on a share of Jumbo Airlines with stnke price AED 102 is 50 fills. Mr. Talha and Mr. Waleed are two investors who hold same amount of AED10.200 before entering into trades. Mr. Talha prefers to invest all the money in LONG Call options, while Mr. Waleed in determined to use whole amount of money to buy shares of Jumbo Airline. 1. What will be the payoffs of Mr. Talha and Mr. Waleed if the spot price of Jumbo's share changes to AED 105 on October 8, 2015. 2. What will be the difference between the payoffs of Mr. Talha and Mr. Waleed if the price of the share would be AED100 on October 8, 2015