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Suppose you already own ABC stock that you plan to sell at USD20. If the current ABC market price is USD15 and the options market
Suppose you already own ABC stock that you plan to sell at USD20. If the current ABC market price is USD15 and the options market is available: a. What is your strategy so that you can earn some money while waiting to achieve the target price? (5) b. Draw the payoff diagram of your strategy (assuming the option premium is zero). (5) c. If ABS's call option price for the period of six months is USD2 and the risk-free rate is 3 percent per annum, what is the estimated price for the ABS put option maturing in six months? (5) Suppose you already own ABC stock that you plan to sell at USD20. If the current ABC market price is USD15 and the options market is available: a. What is your strategy so that you can earn some money while waiting to achieve the target price? (5) b. Draw the payoff diagram of your strategy (assuming the option premium is zero). (5) c. If ABS's call option price for the period of six months is USD2 and the risk-free rate is 3 percent per annum, what is the estimated price for the ABS put option maturing in six months
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