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Question 1: You would like to practice your knowledge of investment and quantitative methods for finance that you learnt at school, so you found two call options A and B, both options sell in the market for $5, for an underlying stock which currently sells at $30. Both options mature in one year, and the risk free rate is 6% and a variance of 30%. Upon maturity, you can exercise option A for $25, and option B for $35. Which option you choose to buy? Explain your answer.

Reference no: EM132538533

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