Question

Hello, I don't just need to know the answer but also how to work out the problem by hand. Thanks for any and all help!

25. Suppose you purchase one Texas Instruments August 75 call contract quoted at $9.50 and write one Texas Instruments August 80 call contract quoted at $7.7. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be A) $150 C) $350 $220 $510 B) D)

Answer 1

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- 2x 335 NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins % Cut Σ AutoSum : A Calibri 11 A A = = = V Wrap Text General Ea Copy Fill Paste B I U B- A E E E s FMerce Merge & Center - Center $ -% % 4.0 .00 . Conditional Format Format Painter Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing IP346 IK ILIM IN 10 IP IQ IR IS IT 333 STEP 1 BUYING A CALL PRICE ON EXPIRY = 79 334 AS PRICE ON EXPIRY > STRIKE PRICE, CALL SHOULD BE EXERCISED PROFIT = PAYOFF - PREMIUM PAID 336 PROFIT = (PRICE ON EXPIRY - STRIKE PRICE) - PREMIUM PAID 337 PROFIT = (79-75) -9.50 = 75), 50 = -5.5 338 AS THE CONTRACT IS OF 100 SHARES, 339 TOTAL PROFIT = -5.5 X 100 = -550 340 341 STEP 2 WRITING A CALL : WE HAVE SOLD CALL OPTIONS, WE ARE SELLER, WE WILL RECEIVE PREMIUM, IT IS OUR INCOME PRICE ON EXPIRY = 79 343 AS PRICE ON EXPIRY < STRIKE PRICE, BUYER OF CALL OPTION WILL NOT EXERCISE 344 THAT MEANS WE HAVE ZERO PAY OFF 345 PROFIT = PAYOFF + PREMIUM RECEIVED 346 PROFIT = 0 +7.70 = 7.70 347 AS THE CONTRACT IS OF 100 SHARES, 348 TOTAL PROFIT = 7.70 X 100 = 770 349 350 ANSWER:B TOTAL PROFIT = -550 + 700 = 351 O CF CASH FLOW STATW FCFARM, MSI,confidenceINDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX GROWTH SUST PREF AND DIV POLICY I Red ferences BOU 130% DO 4 * 4 0 ENG 342 220 H 0 06-11-2019