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Ch 20 revised

# Ch 20 revised - \$0 \$0 \$10,000 \$20,000 Bills 100 options...

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CHAPTER 20: OPTIONS MARKETS: INTRODUCTION 1. Cost Payoff Profit a. Call option, X = \$22.50 \$2.70 \$2.50 -\$0.20 b. Put option, X = \$22.50 \$1.90 \$0.00 -\$1.90 c. Call option, X = \$25.00 \$1.50 \$0.00 -\$1.50 d. Put option, X = \$25.00 \$3.10 \$0.00 -\$3.10 e. Call option, X = \$27.50 \$0.75 \$0.00 -\$0.75 f. Put option, X = \$27.50 \$4.80 \$2.50 -\$2.30 2. In terms of dollar returns, based on a \$10,000 investment: Price of Stock 6 Months from Now Stock Price \$80 \$100 \$110 \$120 All stocks (100 shares) \$8,000 \$10,000 \$11,000 \$12,000 All options (1,000 options)
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Unformatted text preview: \$0 \$0 \$10,000 \$20,000 Bills + 100 options \$9,360 \$9,360 \$10,360 \$11,360 In terms of rate of return, based on a \$10,000 investment: Price of Stock 6 Months from Now Stock Price \$80 \$100 \$110 \$120 All stocks (100 shares)-20% 0% 10% 20% All options (1,000 options)-100%-100% 0% 100% Bills + 100 options-6.4%-6.4% 3.6% 13.6% All options All stocks Bills plus options S T 100 –100 – 6.4 Rate of return (%) 100 110 20-1...
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