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Blondy Ryan owns 20.000 shares of Merrimac Monitoring Equipment stock. This stock makes up the bulk of

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Blondy Ryan owns 20.000 shares of Merrimac Monitoring Equipment stock. This stock makes up the bulk of Blondy's wealth. Concerned about the stock's near-term prospects, Blondy wishes to fully hedge the risk of the stock. Given a hedge ratio of .37 and a premium of $2.50 for the near Merrimac put option, how many put options should Blondy buy?
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The hedge ratio measures the expected change in an options price relative to a one dol...View the full answer


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PALASH JHANWAR
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Related Book For  book-img-for-question
Fundamentals of Investments

Fundamentals of Investments

ISBN: 978-0132926171

3rd edition

Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey

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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.

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