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A firm's stock sells at 50. The stock price will either be 65 or 45 three months from now. Assume the 3 -month risk-free rate
A firm's stock sells at 50. The stock price will either be 65 or 45 three months from now. Assume the 3 -month risk-free rate is 1%. (a) What is the price of a European call with a strike price of 50 and a maturity of three months? [ 6 marks] (b) What is the price of a European call with a strike price of 55 and a maturity of three months? [6 marks] (c) What is the price of a European put with a strike price of 50 and a maturity of three months? [4 marks]
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