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Trans 12 points) 4. The price of a stock is $40. The price of a 1-year put option on the stock with a strike
Trans 12 points) 4. The price of a stock is $40. The price of a 1-year put option on the stock with a strike price of $30 is quoted as $7 and the price of a 1-year European call option on the stock with a strike price of $50 is quoted as $5. Suppose that an investor buys 100 shares, shorts 100 call options and buys 100 put options. Fill the table (30 points) Stock price (ST) in the market $20 $25 $30 $40 $50 $55 $60 Profit for buying 100 shares of stock Option value (Pay off) Short call Premium Profit from shorting 100 call options Option value (Pay off) Buy put Premium Profit from buying 100 put options TOTAL Profit short forward position? (5 points)
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