If you purchased a call option covering 100 shares and the, Financial Management

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If you purchased a call option covering 100 shares and the

Buffelhead’s stock price is $220 and could halve or double in each six-month period. A call option on Buffelhead has an exercise price of $165. The premium is $4 per share.

a. If you purchased a call option covering 100 shares and the price at maturity was $170, calculate your profit (loss) from purchasing the call option.

b. What is your return over the six-month period using information in (c) above?

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