Corporate Finance Assignment/ Professional Essay Writers
Consider the following options portfolio: You buy a July 2017 expiration call option on MICROSOFT with an exercise price of $74. You also buy a July 2017 expiration MICROSOFT put option with an exercise price of $72.
a. Graph the payoff of this portfolio at option expiration as a function of MICROSOFT’s stock price at that time. (3 marks)
b. What will be the profit/loss on this position if MICROSOFT is selling at $70 on the option expiration date? What if MICROSOFT is selling at $77? (6 marks)
c. At what two stock prices will you just break even on your investment? (4 marks)
d. What kind of “bet” are you making; that is, what must you believe about MICROSOFT’s stock price to justify this position? (1 mark). Get Finance Help Today