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1. Assume you have a stock worth 60 that will either going up by 4/3 or down by 3/4 a. What are the RNP (
1. Assume you have a stock worth 60 that will either going up by 4/3
or down by 3/4
a. What are the RNP ( Risk Neutral probabilities of going up and down) if the risk free rate is 0.05?
b. what is the value of a put option with strike price 50?
2. For question 1 assume that this is an annual movement.
a. Set a two year stock evolution tree
b. What is the value of the put option expiring in two years? ( assume risk free is 0.05 and strike is 50)
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