Question: Consider a 50-65 1-year strangle strategy. You are given: (i) The stock currently sells for $55. (ii) In one year, the stock will either sell

Consider a 50-65 1-year strangle strategy. You are given:

(i) The stock currently sells for $55.

(ii) In one year, the stock will either sell for $70 or $45.

(iii) The effective annual risk-free interest rate is 10%.

Calculate the price you now pay for the strangle.

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