Essay
You are evaluating a stock that is currently selling for $30 per share.Over the investment period you think that the stock price might get as low as $25 or as high as $40.There is a call option available on the stock with an exercise price of $35.Answer the following questions about hedging your position in the stock.Assume that you will hold one share.
What is the hedge ratio
How much would you borrow to purchase the stock
What is the amount of your net investment in the stock
Complete the table below to show the value of your stock portfolio at the end of the holding period.
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