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3. Assume a stock currently sells for $50, and at the end of the year the price of the stock will be either $100 or
3. Assume a stock currently sells for $50, and at the end of the year the price of the stock will be either $100 or $25. Assume as well there is a call traded on the stock with a strike price of $80 and the one-year risk-free rate is 10%. (5) a. At expiration, what is the value of the call if the stock price is $100? (5) b. Can you solve for a portfolio of the stock and the call that is risk-free? If so, solve for it. Show your work for credit. (5) c. What is the value of the call option today? Show your work for credit
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