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Prospects of cba shares

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You are bullish on the prospects of CBA shares and are considering two speculative strategies.

  • Under the first strategy, you would purchase 100 CBA shares at the spot price of $4.8.
  • Under the second strategy, you would enter long European call options covering 1,000 CBA shares. The option has a strike price of $6.3 and can be purchased for a premium of $0.48 per share.

How high must CBA share price rise for the second strategy to become at least as profitable as the first? That is, at what share price do the two strategies provide the same profit?

Enter your answer to 2 decimal places.

Reference no: EM132623198

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