A Share of Stock Is Currently Priced at $20 and Will

A share of stock is currently priced at $20 and will change with equal likelihood to either $50 or $10.A call option with a $25 exercise price is available on the stock.How many shares of stock must be purchased to replicate the payoff from owning one call option?

A) $.50 shares
B) $.75 shares
C) $.63 shares
D) $1.25 shares

Correct Answer:

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