Question

Use the date in Figure 15.1to calculate both the payoff and the profit or loss per share for the investments in each of the following July 2017 expiration options, if the stock price on the expiration date is $72. (Loss amounts should be indicated by a minus sign. Round Profit/Loss to 2 decimal places.)

	Payoff	Profit/Loss
a.	Call option, X = 70	2.00selected answer correct	(0.02)selected answer incorrect
b.	Put option, X = 70	0.00selected answer correct	(0.24)selected answer incorrect
c.	Call option, X = 72	0.00selected answer correct	(0.67)selected answer incorrect
d.	Put option, X = 72	0.00selected answer correct	(0.90)selected answer incorrect
e.	Call option, X = 74	0.00selected answer correct	(0.13)selected answer incorrect
f.	Put option, X = 74	2.00selected answer correct	(0.37)

I got the first column correct, I need help on the second column where the answers are all incorrect.

Figure 15.1:

Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017 70 2.02 0.24 June 16, 2017 72 0.67 0.90 June 16, 2017 74 0.132.37 70 July 7, 2017 July 7, 2017 July 7, 2017 72 2.400.58 1.15 1.32 0.42 2.59 74

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

You have done sum correctly conceptually but put June premium figures instead of July premium

- 2x % Cut IT NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins Σ AutoSum : A Calibri 11 A A = = = V Wrap Text General E Copy Fill Paste B I U B- SF A Merge Merge & Center - Center Format Painter $ -% % 4:0 .00 . Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font F Alignment Number Styles Cells Editing IP480 fax _L DJIKIL IMIN 10 IP Q IRIS 480 481 482 MICROSOFT price on expiry = 72 483 PAYOFF PREMIUM PROFIT LOSS = PAYOFF - PREMIUM 484 a call option, x =70 72-70 = 2.4 -0.4 485 b put option, x=70 DO NOT EXERCISE 0.58 -0.58 486 C call option, x =72 DO NOT EXERCISE 1.15 -1.15 487 d put option, x=72 DO NOT EXERCISE 1.32 -1.32 488 e call option, x=74 DO NOT EXERCISE 0.42 -0.42 489 f put option, x=74 74-72 = 2.59 -0.59 490 491 ON EXPIRY, STOCK PRICE IS EQUAL TO STRIKE PRICE, EXERCISE OR NOT IS ONE AND THE SAME, PAYOFF = 0 492 ON EXPIRY, STOCK PRICE

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