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1. Consider the Intel example from the in-class example (handout posted in Canvas). A naive investor wants to try to make money on Intel stock
1. Consider the Intel example from the in-class example (handout posted in Canvas). A naive investor wants to try to make money on Intel stock by safeguarding against changes in the market. This investor instructs the broker to buy one June call option (i.e., 100 shares) at $22.50 and purchase one June put option at $20.00. (a) Scenario 3: If the price of the stock is worth $25 at the June expiration date, what profit/loss was incurred by the investor? (b) Scenario 4: If the stock is worth $15 at the June expiration date, what profit/loss was incurred? (c) Scenario 5: If the stock is worth $21 at the June expiration, what profit/loss was incurred? (d) When does it make sense to act in the manner of the naive investor
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