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5. Compare the following two put options, written on the same stock: T S Implied volatility 50 40% 50 40% Call A B 71

5. Compare the following two put options, written on the same stock: T S Implied volatility 50 40% 50 40% Call A B 71 2 K 50 50 Dividend yield 0 0 Which option will have the greater increase in price if implied volatility increases to 45%? Explain briefly.

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