What is the initial investment and how much stock should we


Suppose we have a stock with S0 = 2, S1(H) = 3, S1(T) = 1; suppose the interest rate r = :05. We wish to replicate a security that pays 10 if the coin is heads and 5 if it's tails. What is the initial investment, and how much stock should we buy?

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Financial Management: What is the initial investment and how much stock should we
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