Exhibit 14.2 (THE EXHIBIT IS THE INFORMATION) USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM...
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Exhibit 14.2 (THE EXHIBIT IS THE INFORMATION) USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM
The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, and a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25 percent or fall by 25 percent. The one-year, risk-free rate is 2 percent. Refer to Exhibit 14.2. Estimate n, which is the number of call options that must be written.
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