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Draw a Graph That Shows the Payoff and Profit to the Holder

Question 103

Essay

Draw a graph that shows the payoff and profit to the holder of a call option at expiration.Draw another graph that shows the payoff to the holder of a put option at expiration.Draw a third graph that shows the payoff of a long straddle at expiration.Be sure to label the axes and all other relevant features of the graphs.

Correct Answer:

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The first graph should look like Figure ...

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