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Consider an investor who purchases a European call option with a strike price of $105 to purchase 100 shares of a stock that is currently
Consider an investor who purchases a European call option with a strike price of $105 to purchase 100 shares of a stock that is currently priced at $100. The expiration date of the option is in three months and the price of the option to purchase one share is $5. What is the initial investment? What is the loss for the investor if the stock price is less than the strike price and the option is not called? What is the gain/loss if the stock prices rises to $106? What is the gain/loss if the stock prices rises to $117?
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