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Suppose that shares are currently priced at $50 a share, and in one period, they...

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Accounting

Suppose that shares are currently priced at $50 a share, and in one period, they will be worth either $45 or $55. The stock does not pay dividends. The riskless interest rate over the period is 4 percent. All the call and put options below are European options. Each of them is on one share and has one period to expiration.

Consider European CALL options with an exercise price of $52.50. a) Calculate the options delta, create a riskless portfolio and show that it is riskless. b) Calculate the current equilibrium call price, current intrinsic value, and current time value

Consider European PUT options with an exercise price of $52.50. a) Calculate the options delta, create a riskless portfolio and show that it is riskless. b) Calculate the current equilibrium put price, current intrinsic value, and current time value.

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