1. In one year, Company A’s stock price will be either $400 or $500. What fraction of a share of Company A’s common stock must you buy to create a replicating portfolio for a call option with a strike price of $425? Give the answer to 4 decimal places.
2. We can use the implied volatility to find a _______ estimate of stock price volatility.
Backward-looking
Instantaneous
Forward-looking
None of the above