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The current price of a non-dividend paying stock is $50 and the continuously compounded risk free...

The current price of a non-dividend paying stock is $50 and the continuously compounded risk free interest rate 8%. Using options, you would like to just expose yourself to the risk and returns of the stock over a period of 6 months without actually buying the stock. Though you don’t have to pay the price of the stock for this, there is still a cost involved now. How much is it?

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Answer #1

Value of the option is $ 2.04 as per the following calculation :

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