Please answer all parts to question 7.

a) Assume a hedge fund manager owns 50,000 shares of AMZN and they bought the stock when it was trading at $85/share. If the manager has a short-term price target of $115, at which point they will sell the stock, what would be the optimal strategy for the manager to use options and gain additional portfolio income.

b) All else equal, American put options are worth more than European put options. Why? How can Black-Scholes help us understand this?

c) If you are examining a firm and see that their ROE as been constant over the past few years, but their leverage has been dramatically increasing, what does that tell you about profit margin if asset turnover has also been relatively steady.