You have purchased one call option expiring in one year with a strike price of $40. The current price of the underlying is $30, the interest rate is zero, and the premium for the call option is $2.63. (1) Draw the payoff and P&L diagrams for the call option at expiration.
(2) What is the P&L on the option at expiration if the underlying is $57.50 (i. e. S, = 57.5) ?
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