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A stock price is currently $25. It is known that at the end of two months it will be either $23 or $27. The risk-free

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A stock price is currently $25. It is known that at the end of two months it will be either $23 or $27. The risk-free interest rate is 10% per annum with continuous compounding Suppose ST is the stock price at the end of two months. The derivative pays off ST*(ST-S0) at T. Consider a portfolio consisting of long delta shares of stock and short 1 unit of derivative. What delta makes the portfolio risk-free? A. 100 B. 25 C. 1/25 D. 0.5

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