Let s 100 sigma 30 r 008 t 1 and delta 0 suppose the


Question: Let S = $100, sigma = 30%, r = 0.08, t = 1, and delta = 0, Suppose the true expected return on the stock is 15%. Set n = 10. Compute European put prices, delta, and B for strikes of $70, $80, $90, $100, $110, $120, and $130. For each strike, compute the expected return on the option. What effect does the strike have on the option's expected return?

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Finance Basics: Let s 100 sigma 30 r 008 t 1 and delta 0 suppose the
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