Stock Price Strike Price Calls Puts

69.50 65 6.80 1.65

69.50 70 3.50 3.45

69.50 75 1.70 6.80

Suppose you buy a call option for $6.80 that matures in June with a strike price of $65.

(i) What is your dollar profit if the stock price in June is $70? What if it is $50?

(ii) Calculate the rate of return.

Now suppose you buy a put option for $1.65 that matures in June with a strike price of $65.

(iii) What is your dollar profit if the stock price in June is $70? What if it is $50?

(iv) Calculate the rate of return.