Calculate the payoff and profit for each position

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Nine months ago, the price of a share of Walt Disney Company (DIS) stock was $95, the price of a nine-month European put option on the DIS stock with a strike price of $90 was $8, and the price of a nine-month European call option on the DIS stock with a strike price of $130 was $35. Suppose that an investor bought 100 shares, shorted 100 call options, and bought 100 put options at that time. Now, at expiration, the price of a share of DIS stock is $147. The risk-free rate is 2% EAR. Calculate the investor’s payoff at expiration, as well as his profit/loss.

Hint: calculate the payoff and profit for each position and then calculate the total payoff and profit. Assume there is an opportunity cost for the price paid on the underlying (similarly to the opportunity cost of the premium paid on the call and put options).

Reference no: EM132036942

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