Question: Please help me to answer this question I do not know how to calculated in detailed. 6. In the context of the single-period binomial option

 Please help me to answer this question I do not know

Please help me to answer this question I do not know how to calculated in detailed.

how to calculated in detailed. 6. In the context of the single-period

6. In the context of the single-period binomial option pricing valuation approach, a stock is currently trading at $1.50 and will be worth either $2.00 or $1.00 next year. A quartic option with one year to maturity has a terminal payoff of Of = (S)', ie., the fourth power of the stock price next year, 51. The replicating portfolio of this quartic option consists of (a) buying 15 shares of stock and lending PV($14.00) today at the risk-free rate. 7 . (2)4 =16 weed to (b) selling 15 shares of stock and borrowing PV($14.00) today at the risk-free rate. (1)9 (c) selling 15 shares of stock and lending PV($14.00) today at the risk-free rate. watch these (d) buying 15 shares of stock and borrowing PV($14.00) today at the risk-free - > Payoffy

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