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Stock currently priced at $100. One period later it can go up to $120, an increase of 20 percent, or down to $90, a decrease
Stock currently priced at $100. One period later it can go up to $120, an increase of 20 percent, or down to $90, a decrease of 10 percent. Assume a call option with an exercise price of $100. The risk-free rate is 8 percent. Calculate the Theoretical fair value of the call. (5 Marks)
Stock currently priced at $100. One period later it can go up to $120, an increase of 20 percent, or down to $90, a decrease of 10 percent. Assume a call option with an exercise price of $100. The risk-free rate is 8 percent. Calculate the Theoretical fair value of the call. (5 Marks)
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