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Suppose you believe that the price of a particular underlying, currently selling at $99, is...

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Finance

  1. Suppose you believe that the price of a particular underlying, currently selling at $99, is going to increase substantially in the next six months. You decide to purchase a call option expiring in six months on this underlying. The call option has an exercise price of $105 and sells for $7.
    1. Determine the profit under the following outcomes for the price of the underlying six months from now:
      1. $99
      2. $104
      3. $105
      4. $109
      5. $112
      6. $115
    2. Determine the breakeven price of the underlying at expiration. Check that your answer is consistent with the solution to Part A of this problem

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