Question
The common stock of Navara Limited serves as underlying asset for the following derivative securities: i) Long Forward contract with a contract price of $50
The common stock of Navara Limited serves as underlying asset for the following derivative securities: i) Long Forward contract with a contract price of $50 ii) Long European style call option with and exercise price of $50 and an option price of $5. iii) Long European style put option with and exercise price of $50 and an option price of $3. Assuming that all the derivatives expiry on the same day, what is the payoff/profit for each of the derivatives at the below closing prices? [6 marks] Price at expiry Forward Call Put $25 ? ? ? $50 ? ? ? $65 ? ? ?
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