Assume that you are given the following information about two stocks: The current price of stock S
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Question:
Assume that you are given the following information about two stocks: The current price of stock S is $80 and the current price of stock Q is $35. The stock S pays a continuous dividend of 2 percent while stock Q pays a 4 % continuous dividend. A call option that gives the right to buy 1 share of stock S at a cost of 2 shares of Q worths $11.247317. That is, C(S,2Q,1) =11.247317. Determine the premium of the call option that allows receiving 1 share of Q by giving up a half share of stock S. In other words, C(Q, 0.5*S,1) =? Round your answer to four digits.
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