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Question 3 (10 marks) Consider the following information for LAZY88.com: The stock is currently priced at $4.00 per share The standard deviation of the stock
Question 3 (10 marks) Consider the following information for LAZY88.com: The stock is currently priced at $4.00 per share The standard deviation of the stock returns is 30% p.a. (i.e., o = 0.3). The risk-free rate of interest is 6% p.a. compounded continuously. Assume the firm pays no dividend. . You structure a European-style exotic derivative on LAZY88.com. The exotic derivative matures in one year and has the following terminal payoff structure: 2S, if S; 5 = Required: Use the package technique' and calculate the maximum profit that you can obtain from the exotic derivative. Show all working
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