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    Derivative security analysis

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    An investor discovers the call option prices on Platinum Mining Co are:
    A call with an exercise price of $1950 costs $108,43. A call with an exercise price of $2000 costs $81,75 and a call with an exercise price of $2050 costs $59,98. All the options have the same maturity date. The current stock price is $2000

    a) Create a butterfly spread strategy and compute the net profit from this position if the stock price remains at $2000 at the expiration date.

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    ** Please see the attached file for the complete solution response **

    Answer: (please see the attached file)
    Given that,
    Exercise price of first call=$1,950
    Price of the first call=$108.43
    Exercise price of second call=$2,000
    Price of the first call=$81.75
    Exercise price of ...

    Solution Summary

    This solution briefly discusses derivative security analysis. It includes providing a butterfly spreas strategy and computing the net profit.