The spot price of google goog is 400 compute the expected


The spot price of Google (GOOG) is $400. The risk-free rate is 5%. In one year, GOOG will either be $300, $400 or $600. Each is equally likely to occur. Let pK and cK denote today’s prices of a one-year GOOG European put and call with strike $K. Today’s prices are p400 = 20, p500 = 80, c400 = 39.51, c500 = 4.39. Compute the expected profit (in t = 1 dollars) of the one year 400-500 European strangle on GOOG.

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Financial Management: The spot price of google goog is 400 compute the expected
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