Question
XYZ has made the following offer to buy Little Genius. . In 6 months time if XYZs stock price is between 40 and 50 Little
XYZ has made the following offer to buy Little Genius. . In 6 months time if XYZs stock price is between 40 and 50 Little Geniuscan exchange one of its shares for 50 dollars. If the price is below 40, however, then Little Genius will receive 1.25 times the share price of XYZ in 6 months. On the other hand if the XYZ's stock price is above 50 then ABD can exchange 1 share of Little Genius for the dollar price of one share of XYZ.
Draw the payout diagram that shows what one share of Little Genius would be worth in 6 months under this proposal. Clearly indicate the axes and the values at critical points.
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