Homework Answers
ANSWER - CURRENT PRICE = $150
call payoff = Max[0, spot price - strike price]
put payoff = Max[0, strike price - spot price]
A. CALL OPTION X = $145
call payoff = Max[0, spot price - strike price]
= Max[0, 150- 145]
= 5
loss = cost of premium - payoff
=5.18 - 5
= 0.18 per share loss
B. PUT OPTION AT X = $145
put payoff = Max[0, strike price - spot price]
= max[0, 145 - 150]
= 0
loss = cost of premium - premium
= 0.48 - 0
loss = 0.48 per share
C. CALL OPTION AT X = $150
call payoff = Max[0, spot price - strike price]
= Max[0, 150- 150]
= 0
loss = cost of premium - payoff
= 1.85 - 0
= 1.85 per share loss
D. PUT OPTION AT X = $150
put payoff = Max[0, strike price - spot price]
= max[0, 150 - 150]
= 0
loss = cost of premium - premium
=1.81 - 0
loss = 1.81 per share
E. CALL OPTION X = $155
call payoff = Max[0, spot price - strike price]
= Max[0, 150- 155]
= 0
loss = cost of premium - payoff
=0.79 - 0
= 0.79 per share loss
F. PUT OPTION AT X = $155
put payoff = Max[0, strike price - spot price]
= max[0, 155 - 150]
= 5
loss = cost of premium - premium
=5.95 - 5
loss = 0.95 per share
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a.
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b.
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QUESTION 10
Consider the monthly data, including the estimates for March
2020, and the information in the articles. Which of the following
is the best analysis of and prediction for the money market in the
U.S. economy for the next few months?
a.
Shortages are causing panic buying by households, which has
increased money demand. Lenders are increasing their lending to
keep up with the needs of households and businesses. Money demand
is increasing more than money supply.
b.
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