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What is the value of a derivative that pays off $100 in six months if an index is greater than 1,000 and zero otherwise? Assume
What is the value of a derivative that pays off $100 in six months if an index is greater than 1,000 and zero otherwise? Assume that the current level of the index is 960, the risk-free rate is 8% per annum, the dividend yield on the index is 3% per annum, and the volatility of the index is 20%.
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