Essay
Alan just bought 100 shares of Global, Inc. (GLO) at $45 per share and as protection he also bought a
three- month put with a $45 strike price at a cost of $400. One of two scenarios is expected to occur in the next three months: (a) GLO shares decline to $33; and (b) GLO shares rise to $61. Calculate the profit or loss under each scenario and explain how the hedge has provided protection for Alan's position in GLO. Ignore transaction costs.
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Cost of GLO = ($45)(100) = $4,500 Cost o...View Answer
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