(a) If you cant sell a share short, you can achieve exactly the same final payoff by...

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(a) If you can’t sell a share short, you can achieve exactly the same final payoff by a combination of options and borrowing or lending. What is this combination?

(b) Now work out the mixture of stock and options that gives the same final payoff as a risk-free loan.

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Principles of Corporate Finance

ISBN: 978-0072869460

7th edition

Authors: Richard A. Brealey, Stewart C. Myers

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Question Posted: Jun 09, 2011 05:31 AM

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(a) If you cant sell a share short, you can achieve exactly the same final payoff by...

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We make use of the putcall parity relationship Value of call Pr...View the full answer

Principles of Corporate Finance

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