The risk free interest rate is 4%. The current price of a stock in company MOP is

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The risk free interest rate is 4%. The current price of a stock in company MOP is 50. Next period the price of MOP stock will either be 40 or 90.

• Determine the state price probabilities for the two states.

• Determine the current price for a digital option that pays one dollar when the MOP price is 40 next period.

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Lectures On Corporate Finance

ISBN: 9789812568991

2nd Edition

Authors: Peter L Bossaerts, Bernt Arne Odegaard

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Question Posted: May 21, 2024 03:03 AM

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The risk free interest rate is 4%. The current price of a stock in company MOP is

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Lectures On Corporate Finance

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