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The current price of Metro stock is 25. During the next year the stock price will either go up by 24% or go down by
The current price of Metro stock is 25. During the next year the stock price will either go up by 24% or go down by 24%. Assume that the stock pays no dividends and that the one-year risk-free rate of interest is 8%. Using the binomial tree model calculate the risk-neutral probabilities and then use them to value a one-year call option and a one-year put option on Metro stock where both options have a strike price of 25
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