E connect Yousef Sherhan FIN4710 Advanced Investment Analysis Summer 2018 FINANC
ID: 2827232 • Letter: E
Question
E connect Yousef Sherhan FIN4710 Advanced Investment Analysis Summer 2018 FINANCE Homework #4 instructions help Question 2 (of 5) | Save & Exit | | Submit value 10.00 points You purchase one Facebook October 170 put contract for a premium of $9.25. What is your maximum possible profit? Assume each contract is for 100 units. Potential profit References eBook & Resources Worksheet Learning Objective: 15-01 Calculate the profit to various option positions as a function of ultimate security prices.Explanation / Answer
Problem 2:
Max profit of put option = Strike price - put premium
Max profit of put option = 170 - 9.25 = $160.75
Problem 5:
Portfolio: V = S + P (X = 48) - C (X = 56)
This is a Collar.
V0 = 51 + 0.55 - 0.55 = 51
S < 48
S = 48
48 < S 56
S = 56
S > 56
S
S
48
S
56
S
P (X = 48)
48 - S
0
0
0
0
C (X = 56)
0
0
0
0
S - 56
VT = S + P - C
48
48
S
56
56
V0
51
51
51
51
51
Profit = VT - V0
-3
-3
S - 51
5
5
Max profit = $5
Max loss = $3
S < 48
S = 48
48 < S 56
S = 56
S > 56
S
S
48
S
56
S
P (X = 48)
48 - S
0
0
0
0
C (X = 56)
0
0
0
0
S - 56
VT = S + P - C
48
48
S
56
56
V0
51
51
51
51
51
Profit = VT - V0
-3
-3
S - 51
5
5
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