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11.) Consider a stock trading at $400 that can go up or down by 20 percent per period. The risk-free rate is 8%. Using the
11.) Consider a stock trading at $400 that can go up or down by 20 percent per period. The risk-free rate is 8%. Using the one period binomial model: a. Determine the two possible stock prices for the next period. b. Determine the intrinsic value at expiration of a European call with an exercise price of $420. C. Find the value the option today. 4
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