The following prices are available for call and put options on a stock priced at $50. The March options have 90 days remaining and the June options have 180 days remaining. The Black-Scholes model was used to obtain the prices.
Use this information to answerthe followingquestions.Assume that each transaction consists of one contract (100 options) unless otherwise indicated.
consider a bull money spread using the March 45/50 calls.
1- How much will the spread cost?
2- What is the maximum profit on the spread?
3- What is the maximum loss on the spread?
4- What is the profit if the stock price at expiration is $47?
5- What is the breakeven point?
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