MGMT 3048 Group Assignment – Semester 1, 2023

ISSUE DATE: October 23, 2023 at midnight

DUE DATE: November 22, 2023 at 11.59 PM ECT

INSTRUCTIONS TO CANDIDATES:

1. There are THREE questions in this assignment. All questions are

compulsory.
2. Candidates are required to work in groups of not more than 5 persons.
3. Each group must indicate a group leader. The group leader is
responsible for coordinating group activity, communication with the
CI/TA, completing and signing the assignment declaration form and
uploading the final submission to the submission Dropbox.
4. The first page of the assignment must have the assignment declaration
form duly completed and signed by the group leader and countersigned
by the remaining group members as a proof of having seen and read the
filled declaration form.
(Declaration Form provided in the Appendix of this document)
5. Completed assignment must be submitted to the designated Dropbox on
the Learning Exchange. No email submissions are allowed.
6. Late submissions attract late submission penalty as per guidelines
specified in the course guide. Plan your work in advance so as to
prevent such an eventuality.
7. Plagiarism in any form is a serious offense and applicable penalty
will be applied as per UWI plagiarism policy if any part of your work
is plagiarized.
8. This graded activity is worth 30% of the total course assessment.

PREPARED BY CHANDRA S BHATNAGAR, CI, MGMT3048 1

Question 1
A call option costing $6 and a put option costing $4 are available, both
with a strike price of $60. You decide to purchase both together such that
your total cost will be $10. Given this information;
a) Complete the table below:

Intrinsic Intrinsic
Stock Call Put Total Total
Value of Value of
Price Profit Profit Payoff Profit
the Call the Put
$45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
65
69
70
75
80
85
90
95
100

b) Within what range of stock prices, will there be a loss?

c) Plot a graph measuring the stock prices on the horizontal axis and
total profit on the vertical axis

d) Search the internet and report the name of and likely motivation of
an investor to follow such a strategy. Limit your response to no more
than 100 words.

(6 + 2 + 3 + 4 = 15 marks)

PREPARED BY CHANDRA S BHATNAGAR, CI, MGMT3048 2

Question 2
You own a lot in Key West, Florida, that is currently unused. The going
price for similar lots is currently $1.2 million. Over the past five years,
the price of land in the area has increased 10 percent per year, with an
annual standard deviation of 19 percent. A buyer has recently approached you
and wants an option to buy the land in the next 9 months for $1,310,000. The
risk-free rate of interest is 7 percent per year, compounded continuously.
How much should you charge for the option? Round off your answer to the
nearest ‘000 dollars and show detailed calculations for each computational
step.
(10 marks)
Question 3
How long do the following options have before they expire?

Call Price = $5
Put Price = $9
Stock Price = $65
Exercise Price = $70
Risk-free rate = 3% per annum
(5 marks)
END OF ASSIGNMENT

PREPARED BY CHANDRA S BHATNAGAR, CI, MGMT3048 3

 APPENDIX
DECLARATION FORM – Use the template below to type up your own

Group Assignment – MGMT3048, Semester 1, 2023/24

(To be completed and attached by the group leader or whoever

submits the assignment on behalf of the group and to be countersigned by
the remaining four group members as a proof of having seen and read the
filled form)

Subgroup →
Marker
(If applicable) →
Group Members Did the group
member
↓
contribute in Additional
the comments in case
assignment? a member has
Tick whichever contributed only
applicable partially (To be
from below (To answered by the
be answered by group leader)
the group Signature and
leader) Counter-
Signatures
YES NO
Name (Group Leader) Signature
Name (Group member) Counter Signature
Name (Group member) Counter Signature
Name (Group member) Counter Signature
Name (Group member) Counter Signature
Name (Group member) Counter Signature

PREPARED BY CHANDRA S BHATNAGAR, CI, MGMT3048 4