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Chapter 20

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MyFinanceLab Solutions

Titman/Keown/Martin Financial Management 11e

Chapter 20
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Chapter 20
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$15
$10
$0

$10

$25

Titman/Keown/Martin Financial Management 11e

Chapter 20
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Chapter 20
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Titman/Keown/Martin Financial Management 11e

Chapter 20
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$25
$10
$0
$10
$15

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Chapter 20
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Titman/Keown/Martin Financial Management 11e

Chapter 20
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Chapter 20
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Chapter 20
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Loss due
to hedging

Profits
without hedging
Profit with hedg

Gains due to

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Maximum Profits

Break-even point

Maximum Loss

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Maximum profits
Break-even point

Maximum loss

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Maximum Profit

Break-even point
Maximum Loss

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Maximum Profit

Break-even point
Maximum Loss

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Maximum Profit

-$5

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Break-even point
Maximum Loss

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Break-even point

Maximum loss

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A.
B.
C.
D.

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Option Value is
$20 $18 = $2

Exercise price
is $18
Current stock price
is $20

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Option Value is
$25 $20 = $5

Exercise price
is $20
Current stock price
is $25

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