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What is the conditional average price of underlying stock

    Assignment Instructions

    Assignment ID: FG133009750

    You believe stock price by year end will have the following multinomial distribution:

    Price            Probability

    60                  10%

    80                 20%

    100              40%

    120             20%

    140             10%

    Problem 1: What should be the stock price TODAY

    Problem 2: what is the prob that a 110 strike CALL will expire ITM?

    Problem 3: what is the conditional average price of underlying stock when 110 strike CALL expires ITM?

    Problem 4: what is the conditional average payment from the 110 strike CALL option when the CALL expires ITM?

    Problem 5: based on Q2-Q4, how much should the 110 CALL be priced at?

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    Asked by: Anonymous
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