An investor shorts 100 shares of a stock when the share price is $50 and closes out the position one week later when the share price is $48. The stock pays a dividend of $1.5 per share during the week. Assume that the risk free interest rate is zero. How much does the investor gain?
Investor gain = ($50 * 1,00) - ($48 * 1,00) - (1.5 * 100)
= $5,000 - $4800 - $150
= $50
Investor gain = $50.
An investor shorts 100 shares of a stock when the share price is $50 and closes...
The price of a share of stock is currently $50. The stock does not pay any dividend. At the end of three months it will be either $60 or $40. The risk-free interest rate is 5% per year. An investor buys a European put option with a strike price of $50 per share. Assume that the option is written on 100 shares of stock. What stock position should the investor take today so that she would hold a riskless portfolio...
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