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You are given the following: - The forward price of one share of QRT stock is $100. -The annual risk-free interest rate is 3%.
You are given the following: - The forward price of one share of QRT stock is $100. -The annual risk-free interest rate is 3%. - A European put option on one share of QRT stock with a strike price of $95 that expires in 1 year costs $9. Diane short-sells QRT stock that has a current price of $95. She also buys a European call option on QRT with a strike price of $95. Diane also shorts a European put option on QRT with a strike price of $85 for a premium of $3. Both options expire in 1 year. a) Graph Diane's profit b) What is Diane's profit if the QRT price is $80? c) What is Diane's profit if the QRT price is $100?
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Step: 1
a To graph Dianes profit we need to calculate the profit from each leg of the position and then add ...Get Instant Access to Expert-Tailored Solutions
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