The purpose of constructing straddle is to profit

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Reference no: EM131960075

1. Based on the following information for a call option on a stock, S =$90 X =$80 RF =.05 T =3 months ? =.20 What is the call premium based on the Black/Scholes model? Select one: a. $12.54 b. $10.12 c. $9.34 d. $11.37 e. $13.11

2. "The purpose of constructing a straddle is to profit if the underlying stock price changes dramatically either on the upside or the downside." True or false?

3. "You borrow an amount of money at an interest rate to buy an asset at the present time; that is, you enter into a long position on the asset. Since you now own the asset, you expect to receive an additional income (if any) and pay for the storage cost (if any). Simultaneously, you enter into a short futures position on the asset for the maturity at time 1. This portfolio is risk-free."True or false?

Reference no: EM131960075

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