How many shares of stock must be purchased to replicate, Finance Basics

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How many shares of stock must be purchased to replicate

Problem

A share of stock is currently priced at $20 and will change with equal likelihood to either $50 or $10.A call option with a $25 exercise price is available on the stock. How many shares of stock must be purchased to replicate the payoff from owning one call option?

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Finance Basics: How many shares of stock must be purchased to replicate

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Finance Basics: How many shares of stock must be purchased to replicate

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