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5. A stock price is $20 now. In 1 month it can go to $22 or $18. The annual interest rate is 11% with continuous

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5. A stock price is $20 now. In 1 month it can go to $22 or $18. The annual interest rate is 11% with continuous compounding. Using risk-free portfolios, determine the value of the one-month European put with strike price 20 and with strike price 19. Use risk-neutral valuation to calculate the probabilities that will give you the correct put prices in problem 5. 5. A stock price is $20 now. In 1 month it can go to $22 or $18. The annual interest rate is 11% with continuous compounding. Using risk-free portfolios, determine the value of the one-month European put with strike price 20 and with strike price 19. Use risk-neutral valuation to calculate the probabilities that will give you the correct put prices in problem 5

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