Suppose that you buy shares of

xYZ

at the current price is

$40

; you also wish to buy insurance. You do this by purchasing a 40-strike put option (with 3 months to maturity) for a premium of

$1.99

and selling a 45-strike call (with the same maturity) for a premium of

$0.97

. The interest rate (discretely compounded and annualized) is

8%

. What is the profit at expiration if the stock price at expiration is

$47.5

? (remember that you also have to account for the profit on stock)\ 3.20\ 3.15\ 0\ 3

Suppose that you buy shares of XYZ at the current price is $40; you also wish to buy insurance. You do this by purchasing a 40 -strike put option (with 3 months to maturity) for a premium of $1.99 and selling a 45 -strike call (with the same maturity) for a premium of $0.97. The interest rate (discretely compounded and annualized) is 8%. What is the profit at expiration if the stock price at expiration is $47.5 ? (remember that you also have to account for the profit on stock) 3.20 3.15 0 3