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The holder of a stock worth $42 is considering placing a collar on it. A put with an exercise price of $40 costs $5.32. A call with the same premium would require an exercise price of $50.59.
a. Determine the value at expiration and the profit under the following outcomes:
i. The price of the stock at expiration is $55.
ii. The price of the stock at expiration is $48.
iii. The price of the stock at expiration is $35
. b. Determine the following:
i. The maximum profit
ii. The maximum loss
c. Determine the breakeven stock price at expiration.
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The rate required in the market on a bond is called the:
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If a firms fixed costs rise relative to varible costs, __ and __.
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