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Answer part iii I don’t understand the risk free rate could be taken as log 1.05 where doesitcomefrom
Getting the risk free rate that way is not in the syllabus and is not relevant for this question – the risk free rate is 5% as per the question and that is what should have been used in the BSOP formula (as indeed it has been in the answer).
(This question was set by the previous examiner who did do some very odd things 🙂 )
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