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You enter into the following option positions with firm ABC Inc, which expire in one year: (i) Buy a call option with an exercise price
You enter into the following option positions with firm ABC Inc, which expire in one year: (i) Buy a call option with an exercise price of $50. The premium is $5. (i) Sell a put option with an exercise price of $50. The premium is $10. a) You believe that one year from now the price per share will be $60.00. Calculate your expected profit or loss, including the premium paid or received from each of the investments above. b) Find the current market price of this stock. Assume that the risk-free annual interest rate is 3%
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