Determine the rate of return from a risk-free hedge

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Consider a stock currently trading at 25 that can go up or down by 15 percent per period. The risk-free rate is 10 percent. Use one-period binomial model. Exercise Price of 25.

- Determine the rate of return from a risk-free hedge if the call is trading at 3.50 when the hedge is initiated.

Reference no: EM131323342

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