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1 year ago

You purchase one microsoft july $72 put contract for a premium of $1. 32. what is your maximum possible profit?

Mathematics

1 answer:

goldenfox [79]1 year ago

4 0

The maximum possible profit = $7068

For given question,

One Microsoft July $72 put contract for a premium of $1.32

The payoff arise from put option is max (K - S, 0) - P

Now it would be maximum at S = 0

And, the maximum payoff is

K - 0 - P

= K - P

= 72 - 1.32

= $70.68

We assume that for each and every contract the number of shares is 100

So, the maximum profit gained from this strategy is

= $70.68 × 100 shares

= $7068

The maximum profit that will be gained from this strategy is $7068

Therefore, the maximum possible profit = $7068

Learn more about the profit here:

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Step-by-step explanation:

$\frac{1}{2} ^{x-4}$ - 3 = $4^{x-3}$ - 2

First, convert $4^{x-3}$ to base 2:

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$\frac{1}{2} ^{x-4}$ - 3 = $(2^{2})^{x-3}$ - 2

Next, convert $\frac{1}{2} ^{x-4}$ to base 2:

$\frac{1}{2} ^{x-4}$ = $(2^{-1})^{x-4}$

$(2^{-1})^{x-4}$ - 3 = $(2^{2})^{x-3}$ - 2

Apply exponent rule: $(a^{b})^{c}$ = $a^{bc}$ :

$(2^{-1})^{x-4}$ = $2^{-1*(x-4)}$

$2^{-1*(x-4)}$ - 3 = $(2^{2})^{x-3}$ - 2

Apply exponent rule: $(a^{b})^{c}$ = $a^{bc}$ :

$(2^{2})^{x-3}$ = $2^{2(x-3)}$

$2^{-1*(x-4)}$ - 3 = $2^{2(x-3)}$ - 2

Apply exponent rule: $a^{b+c}$ = $a^{b}$ $a^{c}$ :

$2^{-1(x-4)}$ = $2^{-1x}$ * $2^{4}$ , $2^{2(x-3)}$ = $2^{2x}$ * $2^{-6}$

$2^{-1 * x}$ * $2^{4}$ - 3 = $2^{2x}$ * $2^{-6}$ - 2

Apply exponent rule: $(a^{b})^{c}$ = $a^{bc}$ :

$2^{-1x}$ = $(2^{x})^{-1}$ , $2^{2x}$ = $(2^{x})^{2}$

$(2^{x})^{-1}$ * $2^{4}$ - 3 = $(2^{x})^{2}$ * $2^{-6}$ - 2

Rewrite the equation with $2^{x} = u$ :

$(u)^{-1}$ * $2^{4}$ - 3 = $(u)^{2}$ * $2^{-6}$ - 2

Solve $u^{-1}$ * $2^{4}$ - 3 = $u^{2}$ * $2^{-6}$ - 2:

$u^{-1}$ * $2^{4}$ - 3 = $u^{2}$ * $2^{-6}$ - 2

Refine:

$\frac{16}{u}$ - 3 = $\frac{1}{64}$ $u^{2}$ - 2

Add 3 to both sides:

$\frac{16}{u}$ - 3 + 3 = $\frac{1}{64}$ $u^{2}$ - 2 + 3

Simplify:

$\frac{16}{u}$ = $\frac{1}{64}$ $u^{2}$ + 1

Multiply by the Least Common Multiplier (64u):

$\frac{16}{u}$ * 64u = $\frac{1}{64}$ $u^{2}$ + 1 * 64u

Simplify:

$\frac{16}{u}$ * 64u = $\frac{1}{64}$ $u^{2}$ + 1 * 64u

Simplify $\frac{16}{u}$ * 64u:

1024

Simplify $\frac{1}{64}$ $u^{2}$ * 64u:

$u^{3}$

Substitute:

1024 = $u^{3}$ + 64u

Solve for u:

u = 8

Substitute back u = $2^{x}$ :

8 = $2^{x}$

Solve for x:

x = 3

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3 years ago