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Questions 16 to 20 refer to the following information: ABC stock is currently priced at $150. It is known that at the end of the
Questions 16 to 20 refer to the following information: ABC stock is currently priced at $150. It is known that at the end of the year it will either be $180 or $130. The risk-free rate of interest is 12% per annum. An option on ABC stock expires at the end of the year and has an exercise price of $160. Question 16 1 pts How do you form the replicating portfolio of the call option on ABC stock? O Buy 0.4 shares in ABC, borrow $46.43 Sell 0.4 shares in ABC, borrow $46.43 O Sell 0.4 shares in ABC, lend $46.43 O Buy 0.4 shares in ABC, lend $46.43
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