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:

Survivor Syndrome

The emotional and psychological effects experienced by employees who remain after a significant organizational change, such as layoffs.

Transitional Stress

Stress experienced during or following a change in one’s life or environment, often associated with adapting to new circumstances or roles.

Layoff Stress

Layoff stress refers to the psychological strain and anxiety caused by job loss or the threat of losing one's job.

Type A Behaviour

A personality characteristic marked by a constant sense of urgency, competitiveness, and an excessive drive to achieve goals.