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Q) What would the option prices be if the probabilities were 70% Chance the stock price rises and 30% chance it falls? Exercise 1. Consider
Q) What would the option prices be if the probabilities were 70% Chance the stock price rises and 30% chance it falls?
Exercise 1. Consider a one step binomial model. The initial stock price is $80. There is a 60% chance the stock price will rise to $90 and a 40% chance it will fall to $75. The risk free bond gets 5%Step by Step Solution
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