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Braxton Sherer has been studying adverse events reports for a pharmaceutical company and is concerned about the possibility of liability lawsuits, but he believes the
Braxton Sherer has been studying adverse events reports for a pharmaceutical company and is concerned about the possibility of liability lawsuits, but he believes the timing is uncertain and likely in the relatively distant future. The current stock price is 48.50 and Sherer decides to implement a bear spread to express this view using the options below: a. What is the breakeven stock price? By what percentage would the stock price need to move to make the strategy break even? (1 point) b. What is the maximum potential gain on a 50-contract position (each contract represents 100 shares)? What is the maximum potential loss? (1 point) Braxton Sherer has been studying adverse events reports for a pharmaceutical company and is concerned about the possibility of liability lawsuits, but he believes the timing is uncertain and likely in the relatively distant future. The current stock price is 48.50 and Sherer decides to implement a bear spread to express this view using the options below: a. What is the breakeven stock price? By what percentage would the stock price need to move to make the strategy break even? (1 point) b. What is the maximum potential gain on a 50-contract position (each contract represents 100 shares)? What is the maximum potential loss? (1 point)
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