You Can Buy a $100 Share That Will Be Worth

question 28

Multiple Choice

You can buy a $100 share that will be worth either $120 or $70 in one year, a $100 bond that will be worth $107 in one year, or a call option for the stock for $10. Developing a replicating portfolio with the BOPM, the proportion of the portfolio in the stock should be

• A) 40%.
• B) 20%.
• C) 60%.
• D) 100%.

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