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Note to Expert: DO NOT copy work from an already completed Chegg post. You must...

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Finance

Note to Expert: DO NOT copy work from an already completed Chegg post. You must solve this problem independently and reach your own mathematical conclusions. The work must be original, thank you.

For the questions, use the following information: A stock has a current price of $150, an annual volatility of returns of 10%, and pays no dividends. The risk-free rate is 10%. Consider a 6-month European call option on this stock with a strike price of $120 and a 2-period binomial options pricing model where u and d are calculated as in class.

1a.) What is the payoff of the option if the stock price goes up twice?

1b.) What is the payoff of the option if the stock price goes up then down?

1c.) What is the payoff of the option if the stock price goes down twice?

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