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a.Explain why futures trading is a zero-sum game.Are options also a zero-sum game? What about buying warrants?
b.Suppose you are long 100 shares of XYZ stock at 50 and you have written a December 50 call option against your long position.Do you want the stock price to go up or down tomorrow? Explain.
c.Answer part b if you have written a December 50 put option instead of the call option.
Annual Cash Inflows
The total amount of money received by a company within one year from its various operational and financial activities.
Oil Production
The extraction of crude oil from the earth, which is later refined and used in the production of various energy products and other materials.
Opportunity Cost
The sacrifice of potential gains that could have been obtained from unchosen options.
Cost of Capital
The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.
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