Assume that eleven months ago you purchased stock in XYZ Company for $50 per share. The stock
Question:
Assume that eleven months ago you purchased stock in XYZ Company for $50 per share. The stock price is now $72 a share but you would like to wait another month before selling the stock in order to pay a lower capital gains tax rate. Explain how you can use a put to protect yourself from this stock falling in value before your expected sale date.
Step by Step Answer:
You can buy a put on the stock which gives you the right to sell ...View the full answer
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Stocks (also known as equities) are securities that represent ownership in a company. They are issued by companies to raise capital, and when an individual buys stocks, they become a shareholder in that company. Investing in stocks can be a way for individuals to potentially earn a return on their investment through dividends and capital appreciation. However, investing in stocks also carries a level of risk, as the value of the stock can fluctuate based on various factors such as the financial performance of the company and general market conditions. For companies, issuing stocks can be a way to raise funds for growth and expansion. When a company goes public by issuing an initial public offering (IPO), it can raise significant capital by selling ownership stakes to the public. Companies can also issue additional stock offerings to raise additional capital as needed.
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