Assume now we are talking about a call option on a bond in which the contract is on $100,000 face value bonds. Assume further, that the option costs $0.15.
(a) Create a payoff and profit table (using a range of underlying prices from $0.65 to $1.05, in increments of $0.10) for the option if the strike price is $0.85. Calculate the bond price for which the owner of the call will break even.
(b) Create a payoff and profit table (using a range of stock prices from $1.05 to $1.45, in increments of $0.10) for the option if the strike price is $1.15. Calculate the bond price for which the owner of the call will break even.