Question

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35. The spot price of the market index is $900. After 3 months the market index is priced at $920. The annual rate of interest on treasuries is 4.8% (0.4% per month). The premium on the long put, with an exercise price of $930, is $8.00. Calculate the profit or loss to the short put position if the final index price is $915. A) $15.00 gain anlwollators to dallwoma siis yninis salos bow ozovni strani nodw. B) $15.00 loss suvni tanto nosobo А (C) $6.90 gain solo il bug brisalo do 8 D) $6.90 loss sul la batud sul ton Bull blow oulavni ozoni ) d

Answer 1

А. B 1 Spot Price $900.00 12 Exercise Price $930.00 3 Future Spot Price $915.00 4 Premium Price $8.00 5 3-Month Interest $0.10 =B4*3*0.4% 6 | 7 Since, future spot price is lesser than exercise price, 8 hence, the contract will be executed 9 10 Gain on contract $15.00 =B2-B3 11 12 Net Gain $6.90 =B10-B4-B5 13 14 Hence, option (C) is correct