1. Construct a synthetic security to mimic the following call option. Then find the value of this...
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1. Construct a synthetic security to mimic the following call option. Then find the value of this synthetic security (call option).
Stock price: $200
Exercise (Strike) price: $200
The stock price will either rise to $300 or fall to $125 at the end of one year.
Risk free rate: 4% annual
Option life: 6 months
2. What is the value of the put option, given the above call option value?
Expert Answer:
Answer rating: 100% (QA)
To construct a synthetic call option you can use a combination of the underlying stock and borrowing ... View the full answer
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