MC stock is selling for 30 per share. It is expected that the stock price will be

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MC stock is selling for 30 per share. It is expected that the stock price will be either 25 or 35 in 6 months. Treasury bills that mature in 6 months yield \(5 \%\). (p.a.). Use a state-price probability (for the "up" state) of 0.5741.

1. What is the price of an \(M C\) option with strike 32 ?

2. Is the stock priced correctly?

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