Stock is priced at $65 and has a volatility of 20% per annum. The risk-free...
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Stock is priced at $65 and has a volatility of 20% per annum. The risk-free rate is 3% per annum (compounded continuously). Price a European derivative that expires in one year and will pay 4 times the decrease in the underlying stock price below $73 if the underlying stock price after 1 year is less than $73 and will pay 7 times the increase in the underlying stock price above $73 if the underlying stock price after 1 year is more than $73.
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