Question
You purchase a one year call option for $6.38 with a strike (exercise) price of $36.35 on a stock that is currently trading a $35.43.
You purchase a one year call option for $6.38 with a strike (exercise) price of $36.35 on a stock that is currently trading a $35.43. At the same time you sell a one year put option with the same strike price of $36.35 for $5.46. The current one year interest rate is 2.59%, one year forward (price) on the stock is $36.35.
Fill in the table below to determine the payoff of a portfolio that is long in the call option and short in the put.
| Assets | State Price ST=$24.35 | State Price ST=$30.35 | State Price ST=$36.35 | State Price ST=$42.35 | State Price ST=$48.35 |
| Call Option X= |
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| Written Put X= |
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| Total Payoff |
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Suppose you also took a short position in a forward contract with a forward price $36.35, What is the payoff of the forward contract?
| Assets | State Price ST=$24.35 | State Price ST=$30.35 | State Price ST=$36.35 | State Price ST=$42.35 | State Price ST=$48.35 |
| Short-Position in the Forward Contract |
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What is the total payoff of your two portfolios, Long Call, written put, and a short forward contract?
| Portoflios | State Price ST=$24.35 | State Price ST=$30.35 | State Price ST=$36.35 | State Price ST=$42.35 | State Price ST=$48.35 |
| Portfolio 1 Call & Written Put |
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| Short Forward Contract |
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| Total Payoff |
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What is the price of the first portfolio (Long Call and Short Put)?
What is the price of the Forward Contract?
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Multinational Financial Management
Authors: Shapiro A.C.
9th International Edition
8126536934, 9788126536931
