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Questions 16 to 25 are based on the following information: IBM stock price follows the following two-step binomial tree. Assume interest rate is zero and

Questions 16 to 25 are based on the following information:

IBM stock price follows the following two-step binomial tree. Assume interest rate is zero and the stock does not pay dividend. All options are European options.

Question 16 (1 point)

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What is the risk neutral probability for the stock to go up at each node (they are the same at all three nodes)?

Question 16 options:

0.33

0.5

0.67

0.7

Question 17 (1 point)

What's the value for a put option at node B with a strike price of $117?

Question 17 options:

$0

$3

$6

$9

Question 18 (1 point)

What's the value for a put option at node C with a strike price of $117?

Question 18 options:

$24

$27

$30

$15

Question 19 (1 point)

What's the value for a put option at node A with a strike price of $117?

Question 19 options:

$17

$18

$19

$20

Question 20 (1 point)

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What's the value for a call option at node A with a strike price of $117?

Question 20 options:

$1

$2

$3

$4

Question 21 (1 point)

What's the replicating portfolio at node A for a put option with a strike price of $117?

Question 21 options:

Short 0.7 share of IBM; Long $90 T-Bills;

Short 0.9 share of IBM; Long $108 T-Bills;

Buy 0.7 share of IBM; Short $90 T-Bills;

Buy 0.9 share of IBM; Short $108 T-Bills;

Question 22 (1 point)

What's the replicating portfolio at node A for a call option with a strike price of $117?

Question 22 options:

Short 0.1 share of IBM; Long $9 T-Bills;

Short 0.3 share of IBM; Long $27 T-Bills;

Buy 0.1 share of IBM; Short $9 T-Bills;

Buy 0.3 share of IBM; Short $27 T-Bills;

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