A stock has equal probability to go up or down in value by 15% in...
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A stock has equal probability to go up or down in value by 15% in each of the next two current stock price is $60 and the risk-free rate is 7% Answer questions from 1 to 3 1- After the stock went down in the first year, you decide to follow the protective put strateGy using the at-the-money put option. What will be the two possible valuest your portfolio (the stock plus the put) by the end of the second year? (Hint: you should compute "stock price in the end of year 2, plus the option payment at the expiration, less what you paid for the option in the end of year 1")
A stock has equal probability to go up or down in value by 15% in each of the next two
current stock price is $60 and the risk-free rate is 7%
Answer questions from 1 to 3
1- After the stock went down in the first year, you decide to follow the protective put
strateGy using
the at-the-money put option. What will be the two possible valuest your portfolio (the stock plus the put) by the end of the second year? (Hint: you
should compute "stock price in the end of year 2, plus the option payment at the
expiration, less what you paid for the option in the end of year 1")
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