Investor has created a hedge-using appropriate terminology

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Reference no: EM13721578

An investor has been following MSFT since its inception. He was an employee of the company for many years but does not own stocks or options in any company. He is concerned that the value of MSFT will unacceptably decline below $30. He therefore buys 1000 put options each at $1 with exercise price of $30. Can you say that the investor has created a hedge? Explain your reasoning using appropriate terminology.

Reference no: EM13721578

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