Econ1452PS4

# Econ1452PS4 - Wallin Econ S-1452 Summer, 2010 Problem Set 4...

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Wallin Econ S-1452 Summer, 2010 Problem Set 4 (Due Friday, July 30 ) 1. Consider the following information on put and call options on a stock: Call price, C 0 = \$4.50 Put price, P 0 = \$6.80 Exercise price, X = \$70 Days to expiration = 139 Current stock price, S 0 = \$67.32 Risk free rate, r = 5% A. Create the payoff and profit tables and graphs for the long call, short call, long put, and short put positions above. Long call Short call Long put Short put S t Payoff Profit Payoff Profit Payoff Profit Payoff Profit 48 0 -4,5 0 4,5 22 15,2 -22 -15,2 50 0 -4,5 0 4,5 20 13,2 -20 -13,2 52 0 -4,5 0 4,5 18 11,2 -18 -11,2 54 0 -4,5 0 4,5 16 9,2 -16 -9,2 56 0 -4,5 0 4,5 14 7,2 -14 -7,2 58 0 -4,5 0 4,5 12 5,2 -12 -5,2 60 0 -4,5 0 4,5 10 3,2 -10 -3,2 62 0 -4,5 0 4,5 8 1,2 -8 -1,2 64 0 -4,5 0 4,5 6 -0,8 -6 0,8 66 0 -4,5 0 4,5 4 -2,8 -4 2,8 68 0 -4,5 0 4,5 2 -4,8 -2 4,8 70 0 -4,5 0 4,5 0 -6,8 0 6,8 72 2 -2,5 -2 2,5 -2 -8,8 2 8,8 74 4 -0,5 -4 0,5 -4 -10,8 4 10,8 76 6 1,5 -6 -1,5 -6 -12,8 6 12,8 78 8 3,5 -8 -3,5 -8 -14,8 8 14,8 Profit S t

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Wallin Econ S-1452 Summer, 2010 B. Use put-call parity to calculate the prices of the following:
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## This note was uploaded on 10/21/2010 for the course ECON 1452 taught by Professor Watson during the Spring '10 term at Harvard.

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Econ1452PS4 - Wallin Econ S-1452 Summer, 2010 Problem Set 4...

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