For Each of the Following Option and Securities Combinations Show

question 15

Essay

For each of the following option and securities combinations show what the payoff would be when the option expires. Assume that each option has an exercise price of $100 and the same expiration date. Use "S" to symbolize the stock price at expiration.
a. Buy a call and invest the present value of the exercise price in a bank deposit
b. Buy a share and a put option on the share
c. Buy a share, buy a put option on the share, and sell a call option on the share
d. Buy a call option and a put option on the share

---

Definitions:

Endorse

To sign the back of a financial document or to publicly support a product, candidate, or policy.

Actual Name

The legal name under which an individual or entity is registered for official purposes.

Ethnocentrism

The belief in the inherent superiority of one's own ethnic group or culture, often accompanied by a general disdain for other cultures.

Grapevine

An unofficial channel of communication within an organization, characterized by the informal and rapid spread of information and rumors.