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Unformatted text preview: 3. The stock of Johnson Corporation currently sells for 80. Mike buys a one year synthetic forward with a one year call and a one year put, both with a strike price of 80 on Johnson stock. The annual effective risk free interest is 4%. Calculate the profit if the spot price of Johnson is 90 in one year. 4. Which of the following are true? Circle each true statement. a. A straddle is a bet on volatility. b. A strangle is a bet on volatility. c. In a collar, you buy a put and sell a call with same strike price. d. In a straddle, you buy a put and a call with same strike price....
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This note was uploaded on 02/05/2012 for the course MA 373 taught by Professor Staff during the Spring '08 term at Purdue.
 Spring '08
 Staff
 Math

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