The cc risk free rate r = -0.15% (yes, r < 0). The spot price for TFS is So = 42.50, the cc dividend rate is 8%, and the annual volatility o = 30%. Using our standard model for a 2 step tree, what is the replicating portfolio at the node t = 0, S = So for a 45 strike call option expiring in 6 months? A = B =

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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The cc risk free rate r = -0.15% (yes, r < 0). The spot price for TFS is So = 42.50, the cc dividend rate
is 8%, and the annual volatility o = 30%. Using our standard model for a 2 step tree, what is the
replicating portfolio at the node t = 0, S = So for a 45 strike call option expiring in 6 months?
A =
B =
Transcribed Image Text:The cc risk free rate r = -0.15% (yes, r < 0). The spot price for TFS is So = 42.50, the cc dividend rate is 8%, and the annual volatility o = 30%. Using our standard model for a 2 step tree, what is the replicating portfolio at the node t = 0, S = So for a 45 strike call option expiring in 6 months? A = B =
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