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You strongly believe that the price of Breener Inc. stock

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4. You strongly believe that the price of Breener Inc. stock will rise substantially from its current level of $137, and you are;considering buying shares in the company. You currently have $13,700 to invest. As an alternative to purchasing the stock itself;you are also considering buying call options on Breener stock that expire in three months and have an exercise price of $140. These call;options cost $10 each.;a. Compare and contrast the size of the potential payoff and the risk involved in each of these alternatives.;b. Calculate the three month rate of return on both strategies assuming that at the option expiration date Breener's;stock price has (1) increased to $155 or (2) decreased to $135.;c. At what stock price level will the person who sells you the Breener call option break even? Can you determine the maximum loss that;the call option seller may suffer, assuming that he does not already own Breener stock?;Additional Requirements;Level of Detail: Show all work;Other Requirements: Please use excel. Show all work, formulas and be very detailed.

 

Paper#26932 | Written in 18-Jul-2015

Price : $27
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