9. A stock is expected to return 10% when the risk-free rate is 4%. What is the correct discount rate to use for the expected payoff on an option in the real world? a. 4% b. 10% c. More than 10% d. We do not know - it could be more or less than 10% 10. The current price of a non-dividend-paying stock is $30. Over the next six months it is expected to rise to $36 or fall to $26. Assume the risk-free rate is zero. An investor sells six-month call options with a strike price of $32. Which of the following hedges the position? Hint: Use a no-arbitrage argument. a. Bur 0.6 shares for each call option sold. b. Bur 0.4 shares for each call option sold. c. Short 0.6 shares for each call option sold. d Short 0.4 shares for each call option sold