Chapter 18, Problem 8P

a.

Summary Introduction

To determine: The range of values for the ending price of stock and call option.

Introduction:

A type of security in a company that denotes ownership is termed as stock. Every company can raise capital funds by issuing stocks.

b.

Summary Introduction

To determine: The range of payoff for option and stock.

Introduction:

Option is a contract to purchase a financial asset from one party and sell it to another party on an agreed price for a future date.

c.

Summary Introduction

To determine: The value of portfolio in one year by creating a riskless hedged investment.

Introduction:

A set of financial investments owned by the investor is termed as Portfolio.

d.

Summary Introduction

To determine: The cost of the stock in the riskless portfolio.

e.

Summary Introduction

To determine: The present value of riskless portfolio.

f.

Summary Introduction

To determine: The value of call option of the firm.