Use the following information to respond to items 26 through 33, below Consider a stock priced at $30 There are put and call options available at exercise prices of $30 The calls are priced at $2 90 and the puts cost $2 15 There are no dividends on the stock and the options are European style Assume that all figures are on a per share basis and there are no commissions Use this information to answer questions 26 through 33 26 What is your profit if you buy only a call option, hold it to expiration, and the stock price at expiration is $37 $7 00 ($2 90) $4 10 $32 90 none of the above 27 What is the breakeven stock price at expiration on the transaction described in problem 26 $32 90 $30 00 $27 10 $32 15 there is no breakeven 28 What is the maximum profit on the transaction described in problem 26 (Ignore the $37 stock price at expiration) $2 90 infinity zero $32 90 $30 00 29 What is the maximum profit that the writer of a naked call can make on the transaction described in problem 26 (Ignore the $37 stock price at expiration) $27 10 $2 90 $30 00 $32 90 none of the above 30 Suppose the investor constructed a covered call At expiration the stock price is $27 What is the investor's total profit or loss ($3 00) $(0 10) $2 90 $0 00 none of the above 31 What is the breakeven stock price at expiration if you had bought the put $27 85 $30 00 $32 15 $27 10 none of the above 32 What is the maximum profit from shorting the put if the position is held to expiration $32 15 $2 15 unlimited $27 85 none of the above 33 What is the maximum loss from the transaction described in problem 29 if the position is held to expiration (Ignore the $37 stock price at expiration) ($30 00) ($32 90) (27 10) unlimited none of the above

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Aug 11, 2024

Use the following information to respond to items 26 through 33, below Consider a stock priced at $30. There are put and call options available

Use the following information to respond to items 26 through 33, below

Consider a stock priced at $30. There are put and call options available at exercise prices of $30. The calls are priced at $2.90 and the puts cost $2.15. There are no dividends on the stock and the options are European-style. Assume that all figures are on a per share basis and there are no commissions. Use this information to answer questions 26 through 33.

26- What is your profit if you buy only a call option, hold it to expiration, and the stock price at expiration is $37?
1. $7.00
2. ($2.90)
3. $4.10
4. $32.90
5. none of the above

27- What is the breakeven stock price at expiration on the transaction described in problem #26?
1. $32.90
2. $30.00
3. $27.10
4. $32.15
5. there is no breakeven

28- What is the maximum profit on the transaction described in problem #26? (Ignore the $37 stock price at expiration).
1. $2.90
2. infinity
3. zero
4. $32.90
5. $30.00

29- What is the maximum profit that the writer of a naked call can make on the transaction described in problem #26? (Ignore the $37 stock price at expiration).
1. $27.10
2. $2.90
3. $30.00
4. $32.90
5. none of the above

30- Suppose the investor constructed a covered call. At expiration the stock price is $27. What is the investor's total profit or loss?
1. ($3.00)
2. $(0.10)
3. $2.90
4. $0.00
5. none of the above

31- What is the breakeven stock price at expiration if you had bought the put?
1. $27.85
2. $30.00
3. $32.15
4. $27.10
5. none of the above

32- What is the maximum profit from shorting the put if the position is held to expiration?
1. $32.15
2. $2.15
3. unlimited
4. $27.85
5. none of the above

33- What is the maximum loss from the transaction described in problem #29 if the position is held to expiration? (Ignore the $37 stock price at expiration).
1. ($30.00)
2. ($32.90)
3. (27.10)
4. unlimited
5. none of the above