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The current price of a stock is $84, and three-month European call options with a strike price of $85 currently sell for $4.20. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares and buying 2,000 call options (= 20 contracts). Both strategies involve an investment of $8,400. What advice would you give? How high does the stock price have to rise for the option strategy to be more profitable?
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A contractor must choose between buying or renting a crane for the duration of a 5 year construction project. The contractor uses an MARR of 8%. The crane costs $590,000 and can be sold for $350,000 after 5 years. Determine the future worth of costs ..
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Simon Enterprises current common stock dividend (year 0) is $2.50 per share and is expected to continue growing at a rate of 5% per year for the foreseeable future. Currently the risk-free rate is 7.5% and the estimated market risk premium (i.e., km ..
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