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

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Definitions:

Color Constancy

The ability of the human visual system to perceive colors of objects as constant under varying illumination conditions.

Shape Constancy

A perceptual phenomenon where the perceived shape of an object remains constant despite changes in the viewing angle or distance.

Proximity

The spatial or psychological closeness or nearness between people or objects, which can influence various aspects of human behavior and perception.

Timbre

The quality of a sound that distinguishes it from others, even when they have the same pitch and loudness.