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(Unless otherwise stated, assume that no dividends are paid on stocks.) 5. You are given: (i) Stock ABC is worth 100 now. (ii) Purchasing a
(Unless otherwise stated, assume that no dividends are paid on stocks.) 5. You are given: (i) Stock ABC is worth 100 now. (ii) Purchasing a share of ABC from a brokerage has a transaction cost of 0.1. (So, if you buy a share of ABC, you must pay 0.1 when this transaction occurs.) (iii) Selling a share of ABC to the brokerage has a transaction cost of 0.1. (So, if you sell a share of ABC, you must pay 0.1 when this transaction occurs.) Suppose that Colleen takes out a loan now to purchase one stock of ABC (the loan covers all costs). The loan compounds interest continuously at r = 0.025, and the loan and interest are to be paid back in 2 years. Furthermore, suppose that ABC rises to 120 in 2 years, after which she sells. What is the overall profit of Colleen's transaction, including all costs? *No rush in answering the question, take your time, but please make sure it is correct. appreciate your help in advance & I will be sure to leave a thumb up (a) 14.57 (b) 14.67 (C) 14.77 (d) 14.87 (e) 14.97
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