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Assume that call options on Microsoft stock with the same exercise date in October are available with exercise prices $45, $55, and $65. Also assume that the price of the middle call is the average of the other two calls. Show that if you sell two of the middle calls and use the proceeds to buy one each of the other calls, your proceeds in October may be positive but cannot be negative despite the fact that your net outlay today is zero. What can you deduce from this example about option pricing?
National Income
The total value of all income earned by the residents of a country in a given period, including wages, profits, and investment returns.
Entrepreneur
An individual who organizes, operates, and assumes the risk for a business venture, often introducing innovations and facilitating economic development.
Karl Marx
A 19th-century philosopher, economist, and revolutionary socialist known for his theories about capitalism and communism.
Demand For Land
The desire for ownership or use of land, driven by various factors including its potential for development, agricultural use, or investment.
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