Suppose that an investor buys a 3-month european call with, Ask an Expert

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Suppose that an investor buys a 3-month European call with a strike price of $40 at $5 and writes a 3- month European call with a strike price of $50 at $3. Assuming that the risk-free rate is 0% (i.e., the upfront payment for the option at maturity has an equal value to the up-front payment when the investor purchase/writes the option, what is the profit if: a) the terminal stock price is $30? b) the terminal stock price is $45? c) the terminal stock price is $55?

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Financial Management, Finance

Category:- Financial Management
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