Determine the payoff and profit at time

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Question - Price of stock of company X at time 0 is 200; Annual effective interest is at rate 5%; European Call and Put option premiums for strike prices are given by the following table; Assume that the stock pays no dividends.

Strike

Call

Put

150

64.6

7.5

170

51.6

13.5

1. Determine the payoff and profit at time 1 of a bull spread: a purchased call with strike price 150 and a written call with strike price 170.

2. Determine the payoff and profit at time 1 of a bear spread: a written call with strike 150 and a purchased call with strike price 170.

3. Using put options, construct a bull spread with the same profit as in part 1.

4. Construct a box spread that has a certain payoff of 40 at time 1.

Reference no: EM132202095

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