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A one year call option with a strike of 50 trades at $5. The stock price is $50. An investor has $5000 to invest and
A one year call option with a strike of 50 trades at $5. The stock price is $50. An investor has $5000 to invest and is considering buying 100 shares or 10 options. Each option controls 100 shares. (a) For both strategies compute the payout, the profit and the one year simple return, if at the expiration date the stock price is 40,50 or 60 . (b) Repeat (a) if the option was a put option (c) Based on (a) and (b) can you conclude that options are levered financial instruments
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