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1,150 1,100 Put Seller 0 0 N Q LN -1,150 -1,100 Put Buyer Call Seller Part 6: The value of point N in Fig. B (the Put Option graph) is: 103145 (2 marks) Part 7: The value of point K in Fig. B (the Put Option graph) is: 101955 (2 marks) Part 8: At point Lin Fig. B (Put Option), the Put buyer: exercises the option and makes a lower profit than $1,100. (2 marks) Part 9: At higher prices of the underlying than point N in the Put option (Fig. B): the buyer and the seller receive identical payoff of $1,100 per contract. (2 marks) Part 10: At price J of the Put underlying in Fig. B: the Put is in the money and the buyer gains an amount exceeding $1,100. (2 marks) Part 11: Point Lin Fig. A and point L in Fig. Bare similar for the reason that: in both cases, the Option is not exercised because the buyer would experience a net loss. (2 marks) Part 12: Point J in Fig. A and point J in Fig. B differ for the reason that: the Call is exercised for a capped loss of $1,150 but the Put is exercised for net-zero profit. (2 marks) Consider the Call option on the Canada 6s of 2038 which expires (matures) in July 2021. Suppose the call premium for one contract on the bond was $1,150 for a strike price of $103,145 in March 2021, and the put premium for the same strike price was $1,100. If the Canada 6s of 2038 bond sold for $102,058 in July 2021, then: Note: Enter all your answers to three decimal places. Do not include the dollar sign: Part 1: The Call value per contract of the option at the expiry date is: -1087 The Call is out of the money and will not be exercised (5 marks) Part 2: The profit per contract for the Call buyer is: -63 (4 marks) Part 3: The break-even expiry price of the underlying for the Call is: (4 marks) 101995 Part 4: The maximum possible profit for the call buyer is 2237 (3 marks) Part 5: The maximum possible profit for the call seller is -13 (2 marks) Fig. A: Payoff from a CallOption Fig. B: Payoff from a Put Option Net Profit Net Pront + Call Buyer 1,150 1,100 Put Seller 0 K N 3 0 j KLN $ -1,150 -1,100 Put Buyer Call Seller 1,150 1,100 Put Seller 0 0 N Q LN -1,150 -1,100 Put Buyer Call Seller Part 6: The value of point N in Fig. B (the Put Option graph) is: 103145 (2 marks) Part 7: The value of point K in Fig. B (the Put Option graph) is: 101955 (2 marks) Part 8: At point Lin Fig. B (Put Option), the Put buyer: exercises the option and makes a lower profit than $1,100. (2 marks) Part 9: At higher prices of the underlying than point N in the Put option (Fig. B): the buyer and the seller receive identical payoff of $1,100 per contract. (2 marks) Part 10: At price J of the Put underlying in Fig. B: the Put is in the money and the buyer gains an amount exceeding $1,100. (2 marks) Part 11: Point Lin Fig. A and point L in Fig. Bare similar for the reason that: in both cases, the Option is not exercised because the buyer would experience a net loss. (2 marks) Part 12: Point J in Fig. A and point J in Fig. B differ for the reason that: the Call is exercised for a capped loss of $1,150 but the Put is exercised for net-zero profit. (2 marks) Consider the Call option on the Canada 6s of 2038 which expires (matures) in July 2021. Suppose the call premium for one contract on the bond was $1,150 for a strike price of $103,145 in March 2021, and the put premium for the same strike price was $1,100. If the Canada 6s of 2038 bond sold for $102,058 in July 2021, then: Note: Enter all your answers to three decimal places. Do not include the dollar sign: Part 1: The Call value per contract of the option at the expiry date is: -1087 The Call is out of the money and will not be exercised (5 marks) Part 2: The profit per contract for the Call buyer is: -63 (4 marks) Part 3: The break-even expiry price of the underlying for the Call is: (4 marks) 101995 Part 4: The maximum possible profit for the call buyer is 2237 (3 marks) Part 5: The maximum possible profit for the call seller is -13 (2 marks) Fig. A: Payoff from a CallOption Fig. B: Payoff from a Put Option Net Profit Net Pront + Call Buyer 1,150 1,100 Put Seller 0 K N 3 0 j KLN $ -1,150 -1,100 Put Buyer Call Seller

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