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Chartered Financial Analyst Level 2

Chartered Financial Analyst Level 2

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A non-dividend-paying stock is currently trading at 50.Acalloptionwithanexercisepriceof50. A call option with an exercise price of 50.Acalloptionwithanexercisepriceof55 has one month until maturity. Using a single-period binomial option valuation model, if the up factor (u) is equal to 1.25 and the down factor (d) is equal to 0.70, the optimal hedge ratio is closest to:

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