Question

Both a call and a put currently are traded on stock XYZ; both have strike prices of $65 and expirations of 6 months.

a. What will be the profit to an investor who buys the call for $4 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1

decimal place.)

40

45

50

55

60

b. What will be the profit to an investor who buys the put for $6.5 in the following scenarios for stock prices in 6 months? (i) $40; (ii) $45; (iii) $50; (iv) $55; (v) $60. (Leave no cells blank - be certain to enter "0" wherever required. Negative amounts should be indicated by a minus sign. Round your answers to 1 decimal place.)

40

45

50

55

60

Answer 1

a)

Call
Strike Price	65
Premium	4
Expiry Price	Profit [{Higher of (Strike Price-Expiry Price, 0)}-Premium]
40	21
45	16
50	11
55	6
60	1

b)

Put
Strike Price	65
Premium	6.5
Expiry Price	Profit [{Higher of (Exercise Price-Strike Price, 0)}-Premium]
40	-6.5
45	-6.5
50	-6.5
55	-6.5
60	-6.5