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Following a solid spring season, shares in Sydney Wilson Lacrosse Gear (NYSE: SWLG) are currently trading at $25 per share. But there is still
Following a solid spring season, shares in Sydney Wilson Lacrosse Gear (NYSE: SWLG) are currently trading at $25 per share. But there is still some uncertainty about the future. In one year, the price is expected either (1) rise to $60 or (2) fall to $10. You are interested in purchasing a call option on SWLG. The option has a strike price of $40 and expires in 1 year. The current risk-free rate for the year is 3%. As shown in class, a "replicating portfolio" consisting of s shares of the stock partially financed by borrowing B dollars will replicate the desired option payoffs. What is s? Enter your answer to three decimal places, truncated. For example, if your answer is 0.3566, enter "0.356".
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