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An investor sells a European call on a share for $ 5 . The stock price is $ 5 0 and the strike price is

An investor sells a European call on a share for $

5 .

The stock price is $

50

and the strike price is $

60 .

Under what circumstances does the investor make a profit? Under what circumstances will the option be exercised? Draw a diagram showing the variation of the investor

s profit with the stock price at the maturity of the option.

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