ADM 430 International Finance – Option Prices and Payoff Problems
- Suppose you bought 2 Xerox call contracts and one Xerox put contract both of which will expire in three months. The exercise price of the call is $70 and the exercise price pf the put is $75. Each option is sold as a 100 share contract.
- What is your payoff of your investment if Xerox stock sells for $65 on the expiration date? What if it sells for $72? What if it sells for $80?
- Draw the payoff diagram for the investment.
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Get Help Now!- Use the Black-Scholes model and the program to price a call with the following characteristics:
Stock price = $60
Strike price = $70
Time to expiration = 4 weeks
Stock price variance = $36
Risk free interest rate = 5%
Find the price of the corresponding put option, that is a $70 put expiring in 4 weeks.
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