Draw a position diagram showing the payoffs

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Reference no: EM132025033

Question: Suppose that Mr. Colleoni borrows the present value of $100, buys a six- month put option on stock Y with an exercise price of $150, and sells a six-month put option on Y with an exercise price of $50.

a. Draw a position diagram showing the payoffs when the options expire.

b. Suggest two other combinations of loans, options, and the underlying stock that would give Mr. Colleoni the same payoffs.

Reference no: EM132025033

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