Devise a hypothetical business situation

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Reference no: EM138792

Q1. a) what output will maximize profit? What is this profit?

b) Will output increase if the price rises to $4.50 to $5.25? Explain your answer.

Q2. Devise a hypothetical business situation in which buying a look back (giving the holder the right to buy or sell the underlying at the highest or lowest price it has attained over the life of the option)call option on a commodity may be a sound strategy for you. How about a down-and-out call option? The chapter deals with time, risk and options.

Reference no: EM138792

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