Question
You hold an American call option with a 30 strike price on an equity that currently sells at 35. The option expires in one year.
You hold an American call option with a 30 strike price on an equity that currently sells at 35. The option expires in one year. Compare the cash flows at expiration from:
(a) Exercising the option now and putting the resulting 5 into a bank account until the expiration date.
(b) Selling short the equity, placing the 35 you receive into a bank account, and holding the option until expiration.
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Get StartedRecommended Textbook for
Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
12th edition
978-0324597714, 324597711, 324597703, 978-8131518571, 8131518574, 978-0324597707
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