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Suppose that there are two companies, Company A and Company B. Company A has a stable stock price; the price of A's stock is not expected to change much in the next year.

Company B, in contrast, has an uncertain stock price; the price of B's stock could increase or decrease by a significant amount in the next year.

Would you pay more for an option on the stock of Company A or Company B? Explain carefully and fully.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92857271

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