1. our portfolio has one stock and one put. You bought the share of stock at $20, and the put at $2 with strike (exercise) price of $25. List your portfolio’s gross payoffs and net profits when stock price is $10, $40.
2. List 5 factors influence option price. What is the effect of on call price if stock price finishes up higher, or underlying stock price risk goes up?
3. Find the convexity of a seven-year maturity, 8.4% coupon bond selling at a yield to maturity of 9.4%. The bond pays its coupons annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.)