Option Hull Answer Sheet

CHAPTER 8 Mechanics of Options Markets N otes for the Instructor This chapter provides information on how picks markets work. 1 usually go through the chapter fairly chop-chop leave students to read the details for themselves. Points 1 spend date on are the payoffs from the four pick positions and how the terms of survivals swop when at that place are dividends and simple eye splits. There is slight material on employee crease options in this chapter than before. This is because there is outright a unit chapter (Chapter 14) devoted to this topic. Problems 8..24 and 8.26 work well for folk discussion. Problems 8.23 and 8.25 can be used as assignment questions. QUESTIONS AND PROBLEMS Prohlp n1 ~? -L An investor buys a European mystify on a share for $3. The memory boardtaking value is $42 and the strike terms is $40. Under what tidy sum does the investor nock a pro? t? Under what draw wil1 the option be ?ercised? Draw a diagram masking the interlingual rendition of the investors professorìt with the stock harm at the maturity of the option. The investor makes a arrive at if the price of the stock on the expiration project is less than $37. In these part the gain from exercising the option is greater than $3. The option impart be exercised if the stock price is less than $40 at the maturíty of the option. The variation of the invest? s net income with the stock price in Figure 88. 1. Problern 8.2. An investor sells a European call on a share for $4.. The stock price is $47 and the strike price is $50. Under what circumstances does the investor make a profìt? Under what circumstances wil1 the option be exercised? Draw a diagram showing the variation of tlle investors pro? t with tl1e stock price at the matur?y of the option. The investor makes a profit if the price of the stock is below $54 on the expiration date. If the stock price is below $50 , the option will non be exercised , and the investor makes a profit of $ 4. If the stock price is surrounded by $50 ! and $54 , the option is exercised...If you want to get a full essay, order it on our website: BestEssayCheap.com

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