Match (drng and drop) the following options strategy with the correct expiry profit diagram. Option Payoffs and Profits $40 $20 Option Payoff Option Profit Exercise Price -$20 -$40 $10 $20 $30 $40 $50 $60 $70 Stock Price At Maturity Payoff and Profit
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Plot the correct answer in the graph:
- Long Put $40 + long call $40
- Long call $20 + short call $35
- Long call $40 + Short call $50
- Long put $40
- Short call $25 + Long Call $35 + Long Call $35 + Short Call $45
- Long underlying $20 + short call $20
- Long call $25 + Short call $35+Short call $35 + long call $45
- Long call $40
- Short call $40+ Short Put $40
- Long Put $40 + Long call $50
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- (Advanced Analysis) The demand for commodity X is represented by the equation P=100-2Q and supply by the equation P=10+4Q. If demand changed from P=100-2Q to P=130-Q, the new equilibrium price is?Design a portfolio using only puts where the profit line has slope 0 from price $0 to $80, slope −1 from price $80 to $90, slope 0 from price $90 to $110, slope 2 from price $110 to $120, and slope 0 from price $120 to infinity. b)Draw the profit curve for Port=P70−2P80+P90+2C110−3C120+C130. Shift slightly for cost.Consider a single-index model economy. The index portfolio M has E(RM ) = 6%, σM = 18%.An individual asset i has an estimate of βi = 1.1 and σ2ei = 0.0225 using the single index modelRi = αi + βiRM + ei. The forecast of asset i’s return is E(ri) = 12%. rf = 4%. a) According to asset i’s return forecast, calculate αi. (b) Calculate the optimal weight of combining asset i and the index portfolio M . (c) Calculate the Sharpe ratio of the index portfolio M and the portfolio optimally combiningasset i and the index portfolio M .
- Excel Online Structured Activity: Black-Scholes Model Assume the following inputs for a call option: (1) current stock price is $29, (2) strike price is $36, (3) time to expiration is 5 months, (4) annualized risk-free rate is 4%, and (5) variance of stock return is 0.31. Use the Black-Scholes model to find the price for the call option. Do not round intermediate calculations. Round your answer to the nearest cent.Whats the profit of the "Bearish Put Spread" when stock price is $25, $30, $35, $40, $45, $50, $55, $60, and $65 respectively? Given: - Stock price = $45.00 - Current option price = 7.0 (put 35) - Current option price = 2.0 (put 45) - Exercise Price = $40.00Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Call Call Put Put Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 9 Buy one August 170 put contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190? Buy one October 165 call contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185 Buy 100 shares of stocks and buy one August 165 put contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the maximum profit and the maximum loss. What is the profit/loss if ST=150. Buy 100 shares of stock and write one October 170 call contract. Hold the position until expiration. Determine the breakeven stock price at expiration, the…
- Suppose that both a call option and a put option have been written on a stock with an exerciseprice of $40. The current stock price is $42, and the call and put premiums are $3 and $0.75,respectively. Draw fully labelled profit diagrams of a long call and a short put.A Vanilla American put and European put options with the same underlying, time to expiry and strike price $26.00, the underlying asset S (0) is $26 and the return over each period R=1.06. CRR notation d=0.8 and u=1.25 Construct a three-step binomial pricing tree for both the Vanilla American and European put options and calculate the premiums. Please Show all working.Using the table below, calculate the Standard Deviation of the portfolio: Demand for Company Products Probability of this Demand Occurring Rate of Return if this demand Occurs (k) Weak 0.15 -30% Below average 0.25 -15% Average 0.25 10% Above Average 0.20 25% Strong 0.15 45%
- Basic Option Strategies Profit Computation Assume the below prices for calls and puts: Call Put Strike Jul Aug Oct Jul Aug Oct 165 2.7 5.25 8.1 2.4 4.75 6.75 170 0.8 3.25 6 5.75 7.5 9 Buy one August 170 call contract. Hold it until expiration. Identify the breakeven stock price at expiration. What is the profit/loss if ST=190? What is the maximum profit? Buy one October 165 put contract. Hold it until the options expire. Identify the breakeven stock price at expiration. What is the Maximum possible loss from the transaction? What is the profit/loss if ST=185compute the convexity of this bound b. Bound A has the following information: face value=RM1, 000 coupon rate=8% potential change in interst rate:0.004% Time to maturity:15 the yield to maturity in 5% using Compounding interst ratdentify the decision rule that best fits each of the following descriptions. Dollar profit Optimistic percentage return Return that assumes reinvestment at WACC Options; MIRR IRR PI