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Question 4 a) The share price of Starbucks Corporation is $90 per share, while the call option is $9 per contract with the exercise price
Question 4 a) The share price of Starbucks Corporation is $90 per share, while the call option is $9 per contract with the exercise price of $99. When an investor buys the call option, he is entitled to purchase Starbucks Corporation share at $99 per share. Raymond has only $90 to invest and believes that the share price is likely to increase significantly in the near future. What are his profit and the rate of return of his investment if he invests all his money in: i) shares? in) options? b) Compare the leverage level of both of the investments as in (1) and (6)
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