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Suppose an investor purchases 100 shares of a stock selling at $50 per share, 100 put options on the stock with exercise price $40 and writes 100 calls on the stock with exercise price $60. Suppose no premium is paid when purchasing a put or writing a call. Draw the payoff to the investor on a graph that has the price of the stock on the horizontal axis and the payoff on the vertical axis. Express the payoff as a piece-wise function of the price of the stock.

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Financial Management, Finance

Category:- Financial Management
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