2009-Quiz 6 - Fin 3144, Spring 2009 Quiz 6 Show your work...

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Name: _____KEY _________________ Quiz 6 Show your work to receive any credit! 1. A call option on ABC stock with the exercise price of $100 is selling at $6.00 and a put option on the same stock with the same exercise price is selling at $2.00. a. Draw a graph that shows the payoff and profit to the holder of a call option at expiration. The graph should look like Figure 20.2, except that the profit line is moved down by 6 units ($) instead of 14. b. Draw a graph that shows the payoff and profit to the holder of a put option at expiration. The graph should look like Figure 20.4 reflecting the price of the put option, which is $2.00. c. Draw a graph that shows the payoff of a long straddle at expiration. Be sure to label the axes and all other relevant features of the graphs. The graph should look like panel C in Figure 20.9. The labels on the graph should include Stock Price on the horizontal axis, Value of the Option on the vertical axis, profit, exercise price, and price of the option, as shown in the textbook figures. 1
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2009-Quiz 6 - Fin 3144, Spring 2009 Quiz 6 Show your work...

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