Consider a stock currently priced at 80 in the next period

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Consider a stock currently priced at $80. In the next period, the stock can either increase by 30% or decrease by 15%. Assume a call option with an exercise price of $80 and a risk free rate of 6%. If the call option is currently trading at $12, what is the risk neutral (riskless) rate of return that can earned using a riskless hedge.

Reference no: EM13363947

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