Exhibit 13-9
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S)
Consider the following information on put and call options for Bank of Montreal
$\begin{array}{ccc}
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 32.50 & \$ 2.85 & \$ 1.65
\end{array}$
-Refer to Exhibit 13-9. Calculate the payoffs of a long strap at a stock price at expiration of $20 and a stock price at expiration of $45.
A) $6.35, $18.85
B) $29.65, $42.15
C) $21.65, $34.15
D) $8, $8
E) -$8, -$8

Question

Exhibit 13-9
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S)
Consider the following information on put and call options for Bank of Montreal
 $\begin{array}{ccc}
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 32.50 & \$ 2.85 & \$ 1.65
\end{array}$
-Refer to Exhibit 13-9. Calculate the payoffs of a long strap at a stock price at expiration of $20 and a stock price at expiration of $45.
A) $6.35, $18.85
B) $29.65, $42.15
C) $21.65, $34.15
D) $8, $8
E) -$8, -$8

Quizplus · Accepted Answer

The payoff of a long strap is the maximum of the payoff of a long put and a long call. At a stock price of $20, the payoff of the long put is $12.50 and the payoff of the long call is $0. Therefore, the payoff of the long strap is $12.50. At a stock price of $45, the payoff of the long put is $0 and the payoff of the long call is $12.50. Therefore, the payoff of the long strap is $12.50.