Transcribed Image Text
Suppose you have the following 4 option contracts that expirein exactly 1 year from today.PremiumStrike PriceCall 1$9.89$75Call 2$4.98$85Put 1$3.41$75Put 2$8.30$85You establish an option positioncombining the purchase of Call 1 and Put 2 and the simultaneoussale of Call 2 and Put 1.What is the cost of establishing this position?Complete the following table, calculating the payoffs of the 4options, the net cost of the position, and the profit of theoverall combination.Stock Price$65$70$75$80$85$90$95Payoff Long Call 1Payoff Short Call 2Payoff Long Put 2Payoff Short Put 1Terminal ValueNet Premium PaidProfitWhat must be the risk-free rate of return given what you foundin part (b)?
Other questions asked by students
Statistics
Mechanical Engineering
Accounting
Accounting
Accounting
Accounting