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Suppose a stock is currently priced at $100 a share, and in one period it...

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Finance

Suppose a stock is currently priced at $100 a share, and in one period it will either increase or decrease by 10% (to $110 or $90). The stock does not pay dividends. The riskless rate for borrowing and lending over the period is 4 percent. There exist exchange-traded European call and put options on the stock with one period to expiration.

e) How would you answers above change if the if the riskless interest rate remained 4%, but the stock prices became more volatile, and in one period the stock price will either increase or decrease by 15% (to $115 or $85).? EXPLAIN. (4 points)

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