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22 September, 06:47

Both a call and a put currently are traded on stock XYZ; both have strike prices of $42 and maturities of six months.

What will be the profit/loss to an investor who buys the call for $4.30 in the following scenarios for stock prices in six months? (Loss amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) Stock Price Profit/Loss

a. $32

b. $37

c. $42

d. $47

e. $52

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Answers (1)
  1. 22 September, 07:09
    0
    Answer and Explanation:

    The solution of profit/loss is shown below:-

    Stock Price Profit/Loss

    a. $32 - $4.30 After 6 months Stock price is less than strike price

    b. $37 - $4.30 After 6 months Stock price is less than strike price

    c. $42 - $4.30 After 6 months Stock price is equal than strike price

    d. $47 $0.7 ($47 - $42 - $4.30)

    e. $52 $5.7 ($52 - $42 - $4.30)
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