What is your payoff if the price at expiration

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Reference no: EM132175215

Question -

1. Suppose that you entered into a cash-and-carry like arrangement where you agreed to sell 10 shares of Apple through a forward contract, where the forward price is the agreed upon price. To hedge the sale, you use the futures arrangement from the previous problem. What is your profit?

Use the table of call and put values on some underlying asset to determine the payoffs described in the problem below.

Strike	Call	Put
40	8.97	3.25
50	4.81	8.10

2. You buy 1 strike 40 call, 1 strike 40 put, and 3 strike 50 calls. Additionally, you write 2 strike 50 puts.

a) What is your payoff if the price at expiration is 55?

b) What is your payoff if the price at expiration is 45?

c) Assume that there is a fee of 2% charged to any buyer. The proceeds go to a broker. All options expire in 1.5 years, and the risk free rate if 5%, compounded continuously what is the profit if the price at expiration is 45?

Reference no: EM132175215

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