Document 9 Please show all of your work. Remember to input your answer without a dollar sign ($) or a comma (,), and only up to 4 decimal places (i.e. 0.50) Assume you bought a European-style call...

please find the instructions in the word file. Thank you


Document 9 Please show all of your work. Remember to input your answer without a dollar sign ($) or a comma (,), and only up to 4 decimal places (i.e. 0.50) Assume you bought a European-style call option on General Electric Company (GE) with maturity October 15 and strike price $6.25. You paid an option premium of $0.25 per GE share (expressed in October 15 dollars). If the GE stock price is $6.40 on October 15, do you exercise the call option? A) Yes B) No What is your payoff on the call option per share of GE? What is the payoff (per GE share) to your counterparty, who wrote the call option that you purchased? Assume you bought a European-style put option on General Electric Company (GE) with maturity October 15 and strike price $6.25. You paid a premium of $0.10 per GE share (expressed in October 15 dollars). If the GE stock price is $6.40 on October 15, do you exercise the put option? A) Yes B) no What is your payoff (not profit) on the put option per share of GE? Assume you bought a European-style call option on General Electric Company (GE) with maturity October 15 and strike price $6.25. You paid an option premium of $0.25 per GE share (expressed in October 15 dollars). When October 15 comes around, the GE stock is trading at $6.40. What is your profit on the call option per share of GE? What is the profit per share to your counterparty who wrote the option you purchased? Assume you bought a European-style put option on General Electric Company (GE) with maturity October 15 and strike price $6.25. You paid a premium of $0.10 per GE share (expressed in October 15 dollars). When October 15 comes around, the GE stock is trading at $6.40. What is your profit on the put option per share of GE? What is the profit to your counterparty who wrote the put option that you purchased? Assume you have built up a position of 10,000 shares in GE. You decide to hedge your position with an option. You focus on European-style GE options with a maturity date of October 15 and a strike price of $6.25. The GE call has an option premium of $0.25 per GE share (expressed in October 15 dollars), while the GE put has an option premium of $0.10 per GE share (expressed in October 15 dollars). Should you purchase the call and/or put option to hedge your GE stock position? A) Call option B) Put option C) Neither D) Both Assume you purchase the appropriate type of option covering your 10,000 shares of GE. Suppose now that when October 15 comes around, the GE stock is trading, at $6.40. What is the gain or loss on your GE option position covering the 10,000 GE shares? A) 2500 gain B) 1500 loss C) 500 gain D) 1000 loss Assume you purchase the appropriate type of option covering your 10,000 shares of GE. Suppose now that when October 15 comes around, the GE stock is trading at $6.40. What is the value of your option-hedged stock position of 10,000 GE shares, taking into account the stocks and all option costs and payoffs? A) 64000 B) 63000 C) 66500 D) 65000