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The stock of Augusta Light and Power is currently selling at $12 per share. Over the next year the company is undertaking a new electricity production project. If the project is successful, the company's stock is expected to rise to $24 per share. If the project fails, the stock is expected to fall to $8 per share. The risk free rate is 6 percent. Calculate the value today of a one year call option on one share of Augusta Light and Power with an exercise price of $15.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92771539

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