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Calculate the profit for both alternatives

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Question - The current price of a stock is R170, and three-month European call options with a strike price of R175 currently sell for R8.50. An investor who feels that the price of the stock will increase is trying to decide between buying 100 shares or buying 2 000 call options. Both strategies involve an investment of R17,000. Calculate the profit for both alternatives if the price increases to R182 and indicate which alternative the investor should choose. How high does the stock price have to rise for the option strategy to be more profitable?

Reference no: EM133024068

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