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You have a stock trading at $ 9 0 . You expect the stock to go to either 1 0 0 or 8 0 in
You have a stock trading at $ You expect the stock to go
to either or in one period. The risk free rate for the
period is Could you replicate the payoff of a call
option on the stock by combining the stock and the risk free
instrument? Justify your answer.
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