3. You short a XYZ stock for $1000 and write a 6-month 950-strike put with premi
ID: 2776103 • Letter: 3
Question
3. You short a XYZ stock for $1000 and write a 6-month 950-strike put with premium $51.777. What is your maximum profit? (The risk-free interest rate is 2% for 6 months.(a) 52.812 (b) 73.134 (c) 122.813 (d) Unlimited
The answer should be C but I can't figure out how to get it 3. You short a XYZ stock for $1000 and write a 6-month 950-strike put with premium $51.777. What is your maximum profit? (The risk-free interest rate is 2% for 6 months.
(a) 52.812 (b) 73.134 (c) 122.813 (d) Unlimited
The answer should be C but I can't figure out how to get it 3. You short a XYZ stock for $1000 and write a 6-month 950-strike put with premium $51.777. What is your maximum profit? (The risk-free interest rate is 2% for 6 months.
(a) 52.812 (b) 73.134 (c) 122.813 (d) Unlimited
The answer should be C but I can't figure out how to get it
Explanation / Answer
The Profit is limited to the premium amount received, plus the interest Premium= 51.78 Interest for 6 months= 2%*0.5= 1% Thus, Interest= 0.52 52.30
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