Determine the breakeven stock price at expiration

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The holder of a stock worth $42 is considering placing a collar on it. A put with an exercise price of $40 costs $5.32. A call with the same premium would require an exercise price of $50.59.

a. Determine the value at expiration and the profit under the following outcomes:

i. The price of the stock at expiration is $55.

ii. The price of the stock at expiration is $48.

iii. The price of the stock at expiration is $35

. b. Determine the following:

i. The maximum profit

ii. The maximum loss

c. Determine the breakeven stock price at expiration.

Reference no: EM131591160

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