Question
A share of stock currently costs $25. You can purchase either the shares, or options to buy the stock anytime this year at $28.50. These
A share of stock currently costs $25. You can purchase either the shares, or options to buy the stock anytime this year at $28.50. These options cost $0.60 each.
14a) What price must the stock rise to this year to make the stock options equally profitable (meaning equal capital gain) to purchasing the stock? (Assume you exercise the options/sell the stock at this price.) Round, if necessary, to the nearest cent.
14b) What price must the stock rise to this year to make purchasing the stock options 5 times as profitable (meaning 5 times the capital gain) as purchasing the stock? Round, if necessary, to the nearest cent.
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