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Business, 10.04.2020 01:41 sincere21

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a one-period world. Answer the following:

a. What would be the call's price if the stock goes up?
b. What would be the call's price if the stock goes down?
c. What is the hedge ratio?
d. What is the theoretical value of the call?

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Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or d...
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