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You are evaluating a stock that is currently selling for $30 per share. Over the investment period you think that the stock price might get

You are evaluating a stock that is currently selling for $30 per share. Over the investment period you think that the stock price might get as low as $25 or as high as $40. There is a call option available on the stock with an exercise price of $35. Answer the following questions about hedging your position in the stock. Assume that you will hold one share. The interest rate is 6%.

a) (5 points) Show the net payoff to your portfolio in the table below.

scenario low stock price high stock price
value of stock at year end
value of call position
total

b) (5 points) What must the price of one call option be?

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