What will be the value of a derivative that pays

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A stock price is currently $20. It is known at the end of one month it will either by $23 or $18. The risk free rate is 6%. Suppose ST is the stock price at the end on one month.

a. What will be the value of a derivative that pays 2ST-40 at this time?

b. What will be the value of a derivative that pays 2ST-20 at this time?

Reference no: EM131304645

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