The following prices are available for call and put options on a stock priced at $50.The risk-free rate is 6 percent and the volatility is 0.35.The March options have 90 days remaining and the June options have 180 days remaining.The Black-Scholes model was used to obtain the prices.
Use this information to answer questions 1 through 20.Assume that each transaction consists of one contract (for 100 shares)unless otherwise indicated.
Answer questions 12 through 17 about a long straddle constructed using the June 50 options.
-What is the profit if the position is held for 90 days and the stock price is $55?
A)-$971
B)-$58
C)-$109
D)-$471
E)none of the above

Question

The following prices are available for call and put options on a stock priced at $50.The risk-free rate is 6 percent and the volatility is 0.35.The March options have 90 days remaining and the June options have 180 days remaining.The Black-Scholes model was used to obtain the prices.
  Use this information to answer questions 1 through 20.Assume that each transaction consists of one contract (for 100 shares)unless otherwise indicated.
Answer questions 12 through 17 about a long straddle constructed using the June 50 options.
-What is the profit if the position is held for 90 days and the stock price is $55?
A)-$971 
B)-$58 
C)-$109 
D)-$471 
E)none of the above

Quizplus · Accepted Answer

The Answer of The following prices are available for call and put options on a stock priced at $50.The risk-free rate is 6 percent and the volatility is 0.35.The March options have 90 days remaining and the June options have 180 days remaining.The Black-Scholes model was used to obtain the prices.
  Use this information to answer questions 1 through 20.Assume that each transaction consists of one contract (for 100 shares)unless otherwise indicated.
Answer questions 12 through 17 about a long straddle constructed using the June 50 options.
-What is the profit if the position is held for 90 days and the stock price is $55?
A)-$971 
B)-$58 
C)-$109 
D)-$471 
E)none of the above

The Following Prices Are Available for Call and Put Options