A company is considering using a call option to hedge against the risk of a decline in
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A company is considering using a call option to hedge against the risk of a decline in the price of its stock. The current stock price is $50, and the company would like to hedge against a price decline over the next 3 months. The strike price for the call option is $55, and the option premium is $2 per share. The company plans to buy 1000 shares of the stock. If the stock price decreases to $45 after 3 months, what is the net profit/loss for the company with and without the call option?
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
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