The current price of a nondividend paying stock is So = 100. The price of the stock at the end of one year, Sı, is eithe

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The current price of a nondividend paying stock is So = 100. The price of the stock at the end of one year, Sı, is eithe

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The Current Price Of A Nondividend Paying Stock Is So 100 The Price Of The Stock At The End Of One Year Si Is Eithe 1
The Current Price Of A Nondividend Paying Stock Is So 100 The Price Of The Stock At The End Of One Year Si Is Eithe 1 (15.64 KiB) Viewed 106 times
The current price of a nondividend paying stock is So = 100. The price of the stock at the end of one year, Sı, is either 90 or 120. The effective annual risk- free interest rate is 10%. Consider a derivative security that pays (S) at the end of one year. 1. (10 pts) Determine the replicating portfolio for the derivative. 2. (5 pts) Calculate the current price of the derivative.
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