NEED JUST ANSWER TO DOUBLE CHECK IF I GOT IT CORRECT THANK YOU !!! 4) You purcha

Question

NEED JUST ANSWER TO DOUBLE CHECK IF I GOT IT CORRECT THANK YOU !!!

4)        You purchased one SPX call option with a strike of 1,500. You wrote one SPX call option with the same maturity date and a strike of 1,450. At maturity, what is your payoff if the S&P 500 is at 1,475?

A. -$2,500

B. -$250

C. $25

D. $250

E. $2,500

5)        High Mountain Homes has an expected annual return of 16.1 percent and a standard deviation of 20.3 percent. What is the smallest expected loss over the next month given a probability of 2.5 percent?

A. -6.64%

B. -8.67%

C. -10.14%

D. -12.12%

E. -15.13%

Explanation / Answer

Answer for question 1

In call option when strike price is below market price then option is in the money and option can be exercise.

Here strike price = $1,500

Market price = $1,475

Since strike price is above market price so option cannot be exercise. Another option has strike price of $1,450 which is less than market price of $1,475. So second option is exercised.

So total payoff = $1,475 - $1,450

                         = $25

Total payoff from option is $25.

Hence, option (C) is correct answer.

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