The stock will either increase or decrease by 18 percent


Risk-Neutral Valuation A stock is currently priced at $54. The stock will either increase or decrease by 18 percent over the next year. There is a call option on the stock with a strike price of $50 and one year until expiration. If the risk-free rate is 8 percent, what is the risk-neutral value of the call option?

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Finance Basics: The stock will either increase or decrease by 18 percent
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