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7. John buys a 1-year European call for a premium of $3.35. If the spot price at expiration is $60, then John's profit is $2:04.

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7. John buys a 1-year European call for a premium of $3.35. If the spot price at expiration is $60, then John's profit is $2:04. The risk-free interest rate is 5% compounded continuously. The strike price is K. Determine K. 8. Bill writes a 3-month European call for a premium of $4.26. The strike price is $70. If the spot price at expiration is $75, then Bill's profit is $0.66. Calculate the annual effective risk-free interest rate

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