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Suppose you are a corporate treasurer, and you manage the cash savings of your firm. You
dont want to lose any initial investment and wish to make a return higher than the risk-free rate
100 in one year: 100 (1 + 0.8 max , 0), i.e., this product guarantees you never lose a
in some cases. Your bank proposes a product that costs 100 and delivers the following payoff
penny and gives you 80% of gain if the stock price appreciates. Will you invest in this product?
Justify your answer with calculations.
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