Problema trader creates a bear spread by selling a 6-month, Ask an Expert

Finance

Problem:

A trader creates a bear spread by selling a 6-month put option with a $25 strike price for $2.15 and buying a 6-month put option with a $29 strike price for $4.75.

Required:

Question 1: What is the initial investment?

Question 2: What is the total payoff (excluding the initial investment) when the stock price in 6 months is (a) $23, (b) $28, and (c) $33.
Please provide explanation and also show all work.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91147236

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