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A one-year call option contract on Cheesy Poofs Co. stock sells for $1,330. In one year,...

A one-year call option contract on Cheesy Poofs Co. stock sells for $1,330. In one year, the stock will be worth $65 or $86 per share. The exercise price on the call option is $78. What is the current value of the stock if the risk-free rate is 3 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Answer #1

One contract consists of 100 shares

1330/100=((1.03-65/S)/(86/S-65/S)*MAX(86-78,0))/1.03
=>Stock price now=98.01930

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