You are long two calls on the same share of stock with the same exercise date. The exercise price of the first call is $40 and the exercise price of the second call is $60. In addition, you are short two otherwise identical calls, both with an exercise price of $50. Plot the value of this combination as a function of the stock price on the exercise date. What is the name of this combination of options?
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- For the next question, consider the two stocks, A and B, in the following table. Pt represents price at time t, and Qt represents shares outstanding at time t. P0 Q0 P1 Q1 A 50 100 45 100 B 30 200 34 200 Calculate the rate of return on a price-weighted index of the two stocks for between t = 0 and t = 1. Assume the divisor value is 2. Enter your answer as a decimal, rounded to four decimal places (e.g, 0.0123).arrow_forwardA stock currently trades at $100. Consider a put and a call option written on this stock with strike price $105. Which of the following statements is most accurate? A.The call option is in-the-money and the put option is out-of-the-money B.The call option is out-of-the-money and the put option is in-the-money C.Both options are in-the-money D.Cannot determine without further informationarrow_forwardAssume a stock with an option with the information as follows. • Stock purchased price was $113.• Call option on the stock was purchased at $4. • Call option has strike price at $115.• the stock price is $117on expiration date Please explain the Call Options Payoff Diagrams below, why it plot like this (please explain step by step) . Thank you for your answeringarrow_forward
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