70.2K

Verified Solution

Link Copied!

Problem 24-3 Calculating Payoffs [LO1]

Use the option quote information shown here to answer thequestions that follow. The stock is currently selling for $41.

						Calls							Puts
				Strike
Option	Expiration			Price		Vol.			Last				Vol.			Last
Macrosoft		Feb		43			99			1.63				54			2.63
		Mar		43			75			1.87				36			3.04
		May		43			36			2.15				25			3.46
		Aug		43			17			2.36				17			3.50

a.	Suppose you buy 24 contracts of the February 43 call option. Howmuch will you pay, ignoring commissions?

   

Suppose you buy 24 contracts of the February 43 call option.Macrosoft stock is selling for $44 per share on the expirationdate.

b-1.	How much is your options investment worth?
b-2.	What if the terminal stock price is $43?

     

Suppose you buy 24 contracts of the August 43 put option.

c-1.	What is your maximum gain?
c-2.	On the expiration date, Macrosoft is selling for $37 per share.How much is your options investment worth?
c-3.	On the expiration date, Macrosoft is selling for $37 per share.What is your net gain?

    

Suppose you sell 24 of the August 43 put contracts.

d-1.	What is your net gain or loss if Macrosoft is selling for $38 atexpiration? (Enter your answer as a positivevalue.)
d-2.	What is your net gain or loss if Macrosoft is selling For $45at expiration? (Enter your answer as a positivevalue.)
d-3.	What is the break-even stock price? (Round your answerto 2 decimal places, e.g., 32.16.)