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An investor buys a European call on a share for $3. The stock price is $40 and the strike price is $42. a. Under what

An investor buys a European call on a share for $3. The stock price is $40 and the strike price is $42.

a. Under what circumstances does the investor make a profit?

b. Under what circumstances will the option be exercised?

c. What is the potential loss for the investor?

d. Identify the variation of the investor's loss with the stock price at the maturity of the option?

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