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You Enter into an Exchange Option Contract Where You Have −30- 30

Question 1

Multiple Choice

You enter into an exchange option contract where you have the right to give up 5 shares of IBM stock in exchange for one share of Google in three months.After three months,IBM is trading at $92 per share while Google is at $430.The payoff at maturity is


A) −30- 30
)
B) Zero.
C) +6+ 6
)
D) +30+ 30
)

Correct Answer:

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