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5) A stock is priced at $73, and can go up or down by 15% next year. There is a Call option with a strike
5) A stock is priced at $73, and can go up or down by 15% next year. There is a Call option with a strike price of X=70 and one year until expiration. The risk free rate of return is 8% a) What are the risk neutral probabilities? b) Using the results in (a), calculate the price of the Call option. c) What happens to the Call option Price and the risk neutral probabilities if the interest rate falls to 5%. Explain your
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