Assume you can borrow or lend money at risk-free rate

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You try to price the call option on XYZ corp. The current stock price of XYZ is $100/share. The risk-free rate is 3%. What is the appropriate price of the 1 year call option of XYZ corp with a strike price of $110 using replicating portfolio approach? You project the stock price of XYZ will either be $100 or $140 in a year. Assume you can borrow or lend money at risk-free rate.

Reference no: EM131559356

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