Question: Question 7 (1 point) Current stock price is 100, which can increase to $110 or decrease to $90. Risk free rate is 5%. Consider a

Question 7 (1 point) Current stock price is 100, which can

Question 7 (1 point) Current stock price is 100, which can increase to $110 or decrease to $90. Risk free rate is 5%. Consider a call with strike $95 that expires after one period. Pick closest number for the answer. g) Note how payoffs of a portfolio in g) matched payoffs of a call. The value of this replication portfolio must match the option price. What is the price of a call according to this approach? Hint: find today's value of the portfolio that is long 0.75 stock and short $64.3 worth of bond. O O O 07 Question 8 (1 point) What is NOT part of risk-neutral option valuation find replication portfolio O estimate risk neutral probability find expected payoff O compute present value

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