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The current price of stock XYZ is $100. Stock pays dividends at the continuously compounded yield rate of 4%. The continuously compounded risk-free rate is
The current price of stock XYZ is $100. Stock pays dividends at the continuously compounded yield rate of 4%. The continuously compounded risk-free rate is 5%. In one year, the stock price may be 115 or 90. The expected continuously compounded rate of return on the stock is 10%. Consider a 105-strike 1-year European call option. Find the continuously compounded expected rate of discount for the call option.
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