Exercise_2[1]

Exercise_2[1] - ANSWER: 6. Your profit for each contract is...

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1 Finance 355: Investments Instructor: Shuming Liu In-Class Exercise 2 Chapter 3 IQ #6 & #8 6. You buy (go long) five copper futures contracts at 100 cents per pound, where the contract size is 25,000 pounds. At contract maturity, copper is selling for 102 cents per pound. What is your profit or loss on the transaction? 8. You buy 100 CJC call option contracts with a strike price of $95 at a quoted price of $1. At option expiration, CJC sells for $97. What is your net profit on the transaction?
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Unformatted text preview: ANSWER: 6. Your profit for each contract is ($1.02 - $1.00) 25,000 = $500 Your total profit for 5 contracts is $500 5 = $2,500 8. Since the market price is $97, buyer may exercise the call: The profit per option: $97 - $95 - $1 = $1 The total profit for 100 option contracts: $1 100 100 = $10,000 NOTE: One option contract contains 100 options....
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