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Suppose a stock is priced at 100. Each of the next two periods it will either go up 10% or fall 10%. The simple, one-period
Suppose a stock is priced at 100. Each of the next two periods it will either go up 10% or fall 10%. The simple, one-period risk-free rate is 2%. What is the price of the two-period butterfly on the stock, which is long two-period calls struck at 90 and 110, and short two two-period calls struck at 100?
a. $4.33. |
b. $4.15. |
c. $4.24. |
d. $4.41. |
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