Multiple Choice
A share of stock is currently priced at $20 and will change with equal likelihood to either $40 or $10.A call option with a $20 exercise price is available on the stock.The interest rate is zero.Which of the following positions will provide (approximately) the same payoffs as the option?
A) Buy 0.667 shares and lend $6.67
B) Buy 0.667 shares and borrow $6.67
C) Buy 0.5 shares
D) Sell 0.667 shares and borrow $0.667
Correct Answer:
Verified
Correct Answer:
Verified
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