FINC 381 Test 3 Examples Complete Solutions.
FINC 381 Test 3 Examples Complete Solutions. The Following price quotations are for exchange listed option on a company's common stock Strike 55 Exp Feb Call 7.25 Put .48 With transaction costs ignored how much would a buyer have to pay for one call option contact. Assume each contract is for 100 shares - CORRECT ANSWER $725 7.25 * 100 = 725 An investor buys a call at a price of $4.50 with an exercise price of $40. At what stock price will the investor break even on the purchase of the Call? - CORRECT ANSWER Break even price: $44.50 40 +4.5 = 44.50 You establish a straddle on Walmart using September call and put options with a strike price of $55. The call premium is $4.5 and the put premium is $5.25 A. what is the most you can lose on this position B. What will your profit or loss if Walmart is selling for $63 in September? C. At what stock prices will you break even on the straddle - CORRECT ANSWER A. Maximum Loss: 9.75 Loss 4.50 + 5.25 = 9.75 B. Loss: Final Value - Original Investment (St - X) - (C + P) 8 - 9.75 = -1.75 C. StX (St - X) - (C+P) (St - 55) - 9.75 = 0 St= 64.75 StX (X - St) - (C + P) (55- St) - 9.75 = 0 St = 45.25
Document information
- Uploaded on
- July 8, 2024
- Number of pages
- 10
- Written in
- 2023/2024
- Type
- Exam (elaborations)
- Contains
- Questions & answers
