Consider a certain butterfly spread on IBM: this is a portfolio that is long one call at $250, long one call at $270, and short 2 calls at $260. Assume expiration of all options is at the same time $T=2$. If today the calls cost $10.00, $5.00, and $1.00 for the strikes at 250, 260, and 270, respectively, what will be the profit or loss from buying this spread if the stock turns out to be trading at $255 at time $T$? Assume the risk-free rate is 5%. Select one: a. 3.28 b. 3.01 c. 4.09 d. 3.89
Consider a certain butterfly spread on IBM: this is a portfolio that is long one call at $250, long one call at $270, and short 2 calls at $260. Assume expiration of all options is at the same time $T=2$. If today the calls cost $10.00, $5.00, and $1.00 for the strikes at 250, 260, and 270, respectively, what will be the profit or loss from buying this spread if the stock turns out to be trading at $255 at time $T$? Assume the risk-free rate is 5%. Select one: a. 3.28 b. 3.01 c. 4.09 d. 3.89
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
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Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance
Section: Chapter Questions
Problem 11PAE
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Consider a certain butterfly spread on IBM: this is a portfolio that is long one call at $250, long one call at $270, and short 2 calls at $260. Assume expiration of all options is at the same time $T=2$. If today the calls cost $10.00, $5.00, and $1.00 for the strikes at 250, 260, and 270, respectively, what will be the profit or loss from buying this spread if the stock turns out to be trading at $255 at time $T$? Assume the risk-free rate is 5%.
Select one:
a. 3.28
b.
3.01
c. 4.09
d. 3.89
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