A strategy consists of buying a market index product at $830 and longing a put on the index with a strike of $830. If the put premium is $18 and interest rate is .5% per month, what is the profit or loss at expiration (in 6 months) if the market index is $810? A $20 gain B $18.65 gain C $36.29 loss D $43.76 loss. I know you will lose $20 or the buy and gain $20 on the put. Minus the premium for $18 you've lost $18, where does the interest rate come in?
This is obviously a hypothitical questions, I posted this last time and got a few answers about different stocks to invest in, and also that I didn't specifiy what the market index product is. This is a question that has to do with generic derivitives, so it could be a S&P Index or anything really. Sorry about the repost but I forgot the interest rate (.5% MONTHLY) last time.
2007-04-02
15:01:49
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2 answers
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asked by
mitchent86
4