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Problem:

Suppose you have $28,000 to invest. You're considering Miller-Moore Equine Enterprises (MMEE), which is currently selling for $40 per share. You also notice that a call option with a $40 strike price and six months to maturity is available. The premium is $4.00. MMEE pays no dividends.

Required:

Question: What is your annualized return from these two investments if, in six months, MMEE is selling for $48 per share? What about $36 per share?

Note: Be sure to show how you arrived at your answer.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M91148362

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