Question
2. Retail investors have been buying huge amounts of Bed Bath and Beyond (BBBY) stock, and today the price skyrocketed to $30.42 per share. You
2. Retail investors have been buying huge amounts of Bed Bath and Beyond (BBBY) stock, and today the price skyrocketed to $30.42 per share. You believe the stock is over valued and decide to short 10 shares of BBBY. One month later the price crashed back down to $9.42. Assume an interest rate of r = 0.01 (1%) per annum. (1.50 Points)
(a) What is your breakeven price?
(b) What is your payoff and profit per share in this scenario?
(c) Create a payoff and profit diagram for this transaction. Be sure to label all axis, and to indicate the breakeven point.
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