An investor has $10,000 that she wants to invest in Apple Corporation. She can either go long
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An investor has $10,000 that she wants to invest in Apple Corporation. She can either go long in Apple’s stock at a spot price of $100 per share on September 17, 2015 or purchase option contracts for $10 per share with an exercise price K = $110 per share, which expires on January 2016. Determine the payoff for both investment strategies assuming ST = $95, ST = $115, and ST = $140. Which strategy would you recommend?
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