Question: RTF Inc. has options traded on the CBOE. As a measure of its volatility, assume the stock price can either go up at $40 or

RTF Inc. has options traded on the CBOE. As a measure of its volatility, assume the stock price can either go up at $40 or down to $15. Interest rates that apply are 1%. Consider a strike 25 call option. Using this strike price and the two possible binomial prices for the stock, the dollar cash flow that a risk-free hedge will generate under each possible strike price will be?

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