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The following two securities are currently trading in the economy. Suppose that annualized continuously compounded interest rate is r, and time to maturity is T.

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The following two securities are currently trading in the economy. Suppose that annualized continuously compounded interest rate is r, and time to maturity is T. 2 ~0 B1 = 0.90 B2 = 0.84 0 > 2 Suppose that there exists a derivative security that pays $1 in the "up" state and $4 in the "down" state. Find the price of the security with risk-neutral valuation. 4.31 O 3.76 02.13 O 1.98

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