can someone please explain how they get the right answer, thank you! Question 9
ID: 2616887 • Letter: C
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can someone please explain how they get the right answer, thank you!
Question 9 Suppose the e ectve annual interest rate ?5 6% and Grant Company's stock currently trades orS71 per share. Suppose the premi in or n l ve ar S75 strike call option on he stockis si 3.02 and the premium or $75 strike put is S12.77 what is the profit earned on a written $75-srike straddle if Granr's stock is worth $96.00 when the options expire? (You may assume the stock pays no dividends over the next year.) Selected Ansr 0 out of 1 points b S-14.66 Aiswers:S-20.74 b S-14.66 e$7.21 d 56.34 eS-21.00Explanation / Answer
In the straddle position we can take a position one on call and one on put Premium of PUT option 12.77 Premium of CALL option 13.02 Total premium paid 25.79 Intrest paid on amount of premium after 1 year = 25.79@6% 1.55 Total Cost 27.34 Here the current stock price is more that strike price so we can exercise Call option Sell share 96 Buy share 75 profit on share 21 There fore loss is 27.34-21 6.34 Anwer D
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