Q. Jennifer wants to create a payoff on the stock Lau Co., as shown below. Payoff 50 30 10 20 40 80 ST 1. What is the payoff to the trading strategy if the stock price at expiration is equal to $0 (i.e., the stock price is zero)? 2. What is the payoff to the trading strategy if the stock price at expiration is equal to $50? 3. What portfolio of calls (maturity T, any strike) and/or bonds (Zero Coupon Bond paying $1 at time T) will give you the desired payoff? Sell $30 zero-coupon bonds, buy a call option with a strike price of $20, sell two call options with a strike of $40, and sell a call option with a strike price of $80 Buy $30 zero-coupon bonds, sell two call option with a strike price of $30, buy 2 call options with a strike of $40, and sell a call with a strike price of $80 It is not possible to construct this payoff with only calls and bonds Sell $50 zero-coupon bonds, buy two call with the strike price of $80, buy two calls with a strike price of $40, and sell a call with a strike of $20 Buy $30 zero-coupon bonds, sell a call option with a strike price of $20, buy two call options with a strike price of $40, and sell a call option with a strike price of $80 Buy $30 zero-coupon bonds, buy a call option with a strike price of $20, sell two call options with a strike of $40, and buy a call with a strike price of $80 4. What portfolio of puts (maturity T, any strike) and/or bonds (Zero Coupon Bond paying $1 at time T) will give you the desired payoff"? Buy $30 zero-coupon bonds, buy a put with a strike price of $20, sell two puts with a strike price of $40, buy a put with a strike price of $80 Buy $50 zero-coupon bonds, sell a put with a strike price of $80, buy two puts with a strike price of $40, sell a put with a strike price of $20 Buy $10 zero-coupon bonds, sell a put with a strike price of $80, buy two puts with a strike price of $40, sell a put with a strike price of $20 It is not possible to construct this payoff with only puts and bonds Buy $10 zero-coupon bonds, buy a put with a strike price of $80, sell two puts with a strike price of $40, buy a put with a strike price of $20
Q. Jennifer wants to create a payoff on the stock Lau Co, as slown below. 3. What portfotio of calls (maturity T, any wrike) and or boods (Zero Coupon Hond paying 51 at time T) will give yoa the desired payotr? opgoas with a anke of 540 , and sell a call option with a strite price at smil call pptipar with a strike of 340 , atut sell a call with a terike price of 580 - It is not possible to consorist this puyeff witicely calls and boods witb ia atrike prope of 540 , int sell a call with a thite of 520 call opeots with a arrike of si0, and thy a call with a strke prow of Sed 4. What portolio of pus (matinity Tiasy strike) and or boods (Zceo Coupver Bond paying SI at time T) will give you the desired payoff? 1. What is the payoff to the irading strategy if the stock prece at expiration is cqsal to So (t, the stock price is rero)? 2. What is the payoff to the trading strategy if the stock poice at expintion is equal to $50
