Min Has Created the Following Portfolio

question 35

Multiple Choice

Min has created the following portfolio:
bought a share for $20
bought 3 puts,strike price $18
maturity 1yr
Suppose at expiration S_T is $17.What is the payoff of her strategy?

• A) $0
• B) $3
• C) −$2
• D) −$3

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Definitions:

Fair Values

The estimated market value of an asset or liability based on current transactions between willing parties.

Gain or Loss

The financial result that occurs when the selling price of an asset differs from its purchase price, either positive (gain) or negative (loss).

Goodwill

An intangible asset that represents the excess value paid for a company over its net identifiable assets, often arising from brand, reputation, or customer relationships.

Carrying Amount

The book value of an asset or liability, calculated as its original cost adjusted for factors such as depreciation or amortization.