You Are Given One Year Stock Options With An Exercise Price Of 30 The Current Stock 2767570
You are given one-year stock options with an exercise price of $30. The current stock price is $30, so the options are at-the-money. Without hedging, the stock price at year-end will either be $28 or $38 with equal probability. Hedging shrinks the range of prices between $30 and $36. Find the difference in expected cash flow under the two scenarios. ____ A) $1 B) $4 C) $10 D) $6
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