Assume the black-schools framework let s be a stock such, Financial Management

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Assume the black-schools framework let s be a stock such

Assume the Black-Schools framework. Let S be a stock such that S(0) = 21, the dividend rate is δ = 0.02, the risk free rate is r = 0.05, and the volatility is σ = 0.2. (a) Calculate the expected payoff of a 6 month call with strike price 17. (b) Calculate the cost of such a call. (c) Calculate the cost of a 6 month put with strike price 17. (d) Calculate the price of a derivative that pays |S(0.5) − 17| in six months for (d) rounded to two decimal places (4.25 is not the right answer).

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Financial Management: Assume the black-schools framework let s be a stock such

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Financial Management: Assume the black-schools framework let s be a stock such

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