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ABC Corp. stock currently trades at $70 per share. One year from today, the stock...

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Finance

ABC Corp. stock currently trades at $70 per share. One year from today, the stock will be worth either $95 or $65 per share with probabilities 45% and 55% respectively. One-year T- bill currently yields 5%.
(a) What is the expected return of the ABC stock?
(b)What is the fair value of a European call option on ABC stock with one year to
expiration and a $75 exercise price?
(c) Describe a portfolio that perfectly replicates this call option.
(d) Suppose the call option is trading for $5. Carefully describe what you would do.

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