Quiz 3_03085 Answers

Quiz 3_03085 Answers - Quiz#3 Finance 357 Business Finance(03085 Last Name First Name UTEID 1(2 points Mr Chang bought two Xerox European call

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Quiz #3 Finance 357 Business Finance (03085) Last Name First Name UTEID 1. (2 points) Mr. Chang bought two Xerox European call contracts and one Xerox European put contract, both of which in expire in three months. Each contract is for 100 options. The exercise price of each call is $75, and the exercise price of each put is $80. What is the payoff of Mr. Chang’s position at expiration if the market price of Xerox stock on the expiration date is $70? What if the market price is $75? What if the market price is $80? If price = $70 Payoff from two call contracts = 0 Payoff from one put contract = $10 x 100 = $1,000 Overall payoff = $1,000 If price = $75 Payoff from two call contracts = 0 Payoff from one put contract = $5 x 100 = $500 Overall payoff = $500 If price = $80 Payoff from two call contracts = $5 x 200 = $1,000 Payoff from one put contract = 0 Overall payoff = $1,000 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 document was uploaded on 02/23/2009.

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Quiz 3_03085 Answers - Quiz#3 Finance 357 Business Finance(03085 Last Name First Name UTEID 1(2 points Mr Chang bought two Xerox European call

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