You buy a share of stock ABC, write a one-year call option with X = $25 (the call option is written on stock ABC), and buy a one-year put option with X = $25 (the put also has as underlying stock the ABC stock). The call and put options have the same expiration date (expiration date = T, that is in one year) and are European options. Your net outlay to establish the entire portfolio is $22.5. What is the payoff of your portfolio in one year (at time T)? The stock pays no dividends. (Do not round intermediate calculations. Please report the number with 2 decimal places.)
You buy a share of stock ABC, write a one-year call option with X = $25 (the call option is written on stock ABC), and buy a one-year put option with X = $25 (the put also has as underlying stock the ABC stock). The call and put options have the same expiration date (expiration date = T, that is in one year) and are European options. Your net outlay to establish the entire portfolio is $22.5. What is the payoff of your portfolio in one year (at time T)? The stock pays no dividends. (Do not round intermediate calculations. Please report the number with 2 decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You buy a share of stock ABC, write a one-year call option with X = $25 (the call option is written on stock ABC), and buy a one-year put option with X = $25 (the put also has as underlying stock the ABC stock). The call and put options have the same expiration date (expiration date = T, that is in one year) and are European options. Your net outlay to establish the entire portfolio is $22.5. What is the payoff of your portfolio in one year (at time T)? The stock pays no dividends. (Do not round intermediate calculations. Please report the number with 2 decimal places.)
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