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Compute the total payoff of the investor position

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Reference no: EM132829832

Question - An investor buys one European call option contract on the stock with a strike price of $30 and one European put option with a strike price of $40. The market prices of options are $4 and $5, respectively. Both options have the same maturity. Consider all the circumstances to compute:

1. Compute the total payoff of the investor position and show the eventual exercise of the option.

2. Compute the realized profit/loss.

3. Illustrate graphically the realized profit/loss with respect to the stock price.

Reference no: EM132829832

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