At an annual continuously compounded interest rate of 2%, the 1-year $20-strike option premiums for a stock
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Question:
At an annual continuously compounded interest rate of 2%, the 1-year $20-strike option premiums for a stock are given below:
• Call premium is $1.0034
• Put premium is $0.6074
An investor buys a 1-year $20-strike straddle on the stock. Assuming the stock price is $0 in 1 year, calculate the investor's profit.
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