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Q7. A stock price is currently 40$. It is known that at the end of 1 month it will be either 42$ or 38$. The

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Q7. A stock price is currently 40$. It is known that at the end of 1 month it will be either 42$ or 38$. The risk-free interest rate is 8% per annum with simple compounding. What is the value of a 1- month European put option with a strike price of 39$. Include a simple illustration of the two possible scenarios, and the corresponding option payoffs

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