2. An investor sells a European call on a share of $5. The stock price is $45 and the strike price is $52. Fill the table and answer 国 Stock price (ST) in the $35 $40 $45 $47 $50 $52 $55 $60 market Option value (Pay off) Premium Profit a) Under what circumstances does the investor make a profit? b) Under what circumstances will the option be exercised? c) What is the maximum loss an investor can incur?
2. An investor sells a European call on a share of $5. The stock price is $45 and the strike price is $52. Fill the table and answer 国 Stock price (ST) in the $35 $40 $45 $47 $50 $52 $55 $60 market Option value (Pay off) Premium Profit a) Under what circumstances does the investor make a profit? b) Under what circumstances will the option be exercised? c) What is the maximum loss an investor can incur?
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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Transcribed Image Text:2. An investor sells a European call on a share of $5. The stock price is $45 and the strike price is $52.
Fill the table and answer
田
Stock price (ST) in the
$35
$40
$45
$47
$50
$52
$55
$60
market
Option value (Pay off)
Premium
Profit
a) Under what circumstances does the investor make a profit?
b) Under what circumstances will the option be exercised?
c) What is the maximum loss an investor can incur?
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