PS7 - Problem Set #7 Finance 357 Business Finance Please...

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Problem Set #7 Finance 357 Business Finance Please note that you do not have to submit your answers. They will not be graded. But, similar questions will appear in the quiz. Answer keys will be uploaded at Blackboard soon. 1. (2 points) Mr. Chang bought two Xerox European call contracts and one Xerox European put contract, both of which expire in three months. Each contract is for 100 options. The exercise price of each call is $70, and the exercise price of each put is $75. a. What is the payoff of Mr. Chang’s position at expiration if the market price of Xerox stock on the expiration date is $65? What if the market price is $72? What if the market price is $80? b. Draw Mr. Chang’s payoff diagram with respect to the stock price at expiration. 2. Louis holds a six-month European call option contract on Hurricanes Inc., a non- dividend-paying common stock. Each contract is for 100 options. The exercise price of each call option is $100, and the option will expire in moments. Assume there are
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This note was uploaded on 02/23/2009 for the course FIN 374C taught by Professor Goldreyer during the Fall '08 term at University of Texas at Austin.

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PS7 - Problem Set #7 Finance 357 Business Finance Please...

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