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Problem 11. (4+4 pts) You are considering the purchase of an American call op- tion on a non-dividend-paying stock. Assume the Black-Scholes framework. You are
Problem 11. (4+4 pts) You are considering the purchase of an American call op- tion on a non-dividend-paying stock. Assume the Black-Scholes framework. You are given: (i) The stock is currently selling for $40. (ii) The strike price of the option is $41.5. (iii) The option expires in 3 months. (iv) The stock's volatility is 30%. (v) The current call option delta is 0.5. (a) Determine the current price of the option. (b) Find the risk-neutral probability that the option will expire in the money
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