Question

1) A call option is priced at $7 with an exercise price of $100 and an underlying stock price of $98. If the stock price at expiry is $102 determine the following: o Option value for a long position o Profit for a long position 2) A put option is priced at $4 with an exercise price of $60 and an underlying price of $62. Determine the following: o Option value for a long position if the stock price at expiry is $62 o Profit for the long position if the stock price at expiry is $55 • What is the breakeven stock price at expiration (price at which the option cost is covered for the long position) 3) The share price of Win Big Inc. is $77. A day trader buys 100 shares at $77 per share. To protect the position, they buy put contracts covering the 100 shares with an exercise price of $75. The put premium is $3 per contract. At contract expiration, Win Big Inc. is trading at $70 per share. Determine the profit/loss from the strategy. 4) Company A is a protection buyer in a $ 10 million notional principle senior CDS of ix USA Inc. iX USA Inc defaults and the market prices of its bonds after the credit event are as follows: Bond A-Subordinated unsecured debenture is trading at 20% of par Bond B - Junior secured debenture is trading at 30% of par Bond C - Senior unsecured debenture trading at 35% of par Bond D - Senior secured debenture trading at 40% of par What will the payoff the CDS be? O o o i)

Answer 1

Value = 1 option $7 profit for a long position - $102- $100 ¢ 2

I can only answer 1 question at a time so I am solving question 1.

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