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1. (10 marks) Use risk neutral valuation to value a PUT option on 8,000 with a strike price of 10,000. (/) = 0.80/, = 10%
1.(10 marks) Use risk neutral valuation to value a PUT option on 8,000 with a strike price of 10,000.
(/) = 0.80/, = 10% and = 3%
In the next year, there are two possibilities:
(/) = 1.00/ or
(/) = 0.65/
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