You Are Evaluating a Stock That Is Currently Selling for $30

question 53

Essay

You are evaluating a stock that is currently selling for $30 per share.Over the investment period you think that the stock price might get as low as $25 or as high as $40.There is a call option available on the stock with an exercise price of $35.Answer the following questions about hedging your position in the stock.Assume that you will hold one share.
What is the hedge ratio
How much would you borrow to purchase the stock
What is the amount of your net investment in the stock
Complete the table below to show the value of your stock portfolio at the end of the holding period.

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Definitions:

Calculated Field

A field in databases or spreadsheets that gets its value from the formula or expression defined by other fields.

Relational Databases

A database design that identifies the relationships between stored data elements.

Top-down Design

A design methodology that breaks down a system into smaller parts in order to understand, manage, and implement a complex system.

Object-oriented Analysis

Object-oriented Analysis is a computer programming methodology that focuses on defining the types of objects that system operations can apply to rather than the logic of the operations themselves.