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a) Put options on Chicken King with a strike price of $42.50 and 2 months to maturity are properly priced to sell for $3.68 (no bid-ask spread). Call options with the same strike and maturity are selling for $0.88. If the current price of Chicken King's stock is $39.75 and the risk-free rate is 4% p.a., explain how you can profit from the situation without taking on any net risk to yourself.
b) Compare the costs and benefits of building a collar strategy to hedge a short risk exposure vs. just buying a call option. What factors would influence your choice between the two strategies?
c) Why aren't most options exercised before expiration, even when they are in the money?
Initial investment 1950000 net cash flow 2075246 discount 15% find irr. Please solve in detail. regards thanks. .
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