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The current price of a non-dividend paying stock L is EUR 100. In 1-year time, its price can be either EUR 80 or EUR 120.
The current price of a non-dividend paying stock L is EUR 100. In 1-year time, its price can be either EUR 80 or EUR 120. The current price of a non-dividend paying stock H is also EUR 100. 1-year from now its price can be either EUR 60 or EUR 140. Let PL be the price of a 1-year Put option on stock L, with Strike XL = EUR 100. Let PH be the price of a 1-year Put option on stock H, with Strike XH = EUR 100. Select what is correct.
a. PL is lower than PH
b. PL is bigger than PH
c. PL is equal to PH
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