Investor A wrote a 104-strike 1-year call option whose price is 2. Investor B entered into a
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Investor A wrote a 104-strike 1-year call option whose price is 2. Investor B entered into a 1-year long forward with a forward price of 105.
The continuously compounded risk-free interest rate is 5%.
It turns out that Investor A and Investor B earned the same profit.
Calculate the 1-year stock price.
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Equating the profits of the short call and long forward we solve the equation for S1 D...View the full answer
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