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Calculate the profit for the expiry share-prices

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Harold buys 1,000 ANZ shares at a price of $8.47 and decides to construct a hedge using an equal number of put options, with an exercise price of $8.75 and a cost of 40c per option. Ignoring the time difference between the purchase or sale of the option and its expiry:

Question i) Construct a clearly labelled diagram showing the expiry profit as a function of share-price, from the hedged position.

Question ii) Calculate the profit for the expiry share-pricesof $8.25 and $9.00

Reference no: EM132578904

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