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Construct a table of the investors profit (loss) given the following stock prices at expiration: $10, 15, 20, 25, 30, 35, 40, 45, 50.

05 / 03 / 2018 Assignment

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Question 1

a.Construct a table of the investors profit (loss) given the following stock prices at
expiration: $10, 15, 20, 25, 30, 35, 40, 45, 50.

.homeworkminutes.com/answer/view/71242#”>purchase
exercise

$2.00
$30.00

$45.00
$13.00

$50.00
$18.00

$45.00
$(2.00)

$50.00
$(2.00)

Answer
Stock Price
profit or Loss

$10.00
$(2.00)

$15.00
$(2.00)

$20.00
$(2.00)

$25.00
$(2.00)

$30.00
$(2.00)

$35.00
$3.00

$40.00
$8.00

b. Now construct a table assuming the option had been a put option instead of a call
option.

Answer
Stock Price
profit or Loss

$10.00
$18.00

$15.00
$13.00

$20.00
$8.00

$25.00
$3.00

$30.00
$(2.00)

$35.00
$(2.00)

$40.00
$(2.00)

c. Graph the profit/loss schedules in parts (a) and (b). Indicate at what stock
prices the investor would breakeven with both the call and put options.

Answer

Breackeven-Call&Put Opt ions

Row 6

Row 12

d. If the investor had purchased both the call and the put, what type of strategy would they
be using?

Answer
The type of strategy when investor purchasing a combination of a call and a put, each with
the same exercise price and expiration date called " Straddle"


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