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 stock price at expiration is at $64.75?
A)-$971
B)$1,475
C)-$3,525
D)$500
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 stock price at expiration is at $64.75?
A)-$971 
B)$1,475 
C)-$3,525 
D)$500 
E)none of the above

Quizplus · Accepted Answer

The question does not provide enough information to calculate the profit, such as the initial stock price, the number of shares, or whether options or other derivatives are involved.

The Following Prices Are Available for Call and Put Options