Problem

You are given the following:Price of the stock$18Price of a three-month call at $202Price...

You are given the following:

Price of the stock

$18

Price of a three-month call at $20

2

Price of a three-month call at $15

5

a) What is the profit (loss) at the expiration date of the options if the price of the stock is $14, $20, or $25 and if the investor buys the option with the $20 strike price and sells the other option?

b) Compare the profit (loss) from this strategy with shorting the stock at $18.

c) What is the profit (loss) at the expiration date of the options if the price of the stock is $14, $20, or $25 and if the investor buys the option with the $15 strike price and sells the other option?

d) Compare the profit (loss) from this strategy with buying the stock at $18. ?

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Solutions For Problems in Chapter 18