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One share of equity in Mullen Inc. is currently trading at $49 per share. In one year, the price is expected to (1) rise
One share of equity in Mullen Inc. is currently trading at $49 per share. In one year, the price is expected to (1) rise to $65, or (2) fall to $40. You are interested in a call option on Mullen, Inc. The option has a strike price of $57 and expires in 1 year. The current risk-free rate for the year is 3%. As you can calculate, the binomial price for this option is about $3.25. However, an options trader is quoting a price of $4.00 to buy or sell the option. And you know how to arbitrage this. You take a long position in the replicating portfolio, by purchasing. and borrowing $12.43, and you short (sell) the option for $4.00. How many shares of Mullen, Inc. did you purchase? shares of Mullen, Inc. Enter your answer in decimal format to 2 decimal places. For example, if your answer is 0.5722, enter "0.57".
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