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  • 22-07-2024
  • Business
Answered

A binary option pays off R240 if a stock price is greater than R50 in six months. The current stock price is R43, and its volatility is 35% per annum. The risk-free rate is 6% (continuously compounded) and the expected return on the stock is 11.5% (continuously compounded). Calculate the value of this option.



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