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Compute the prices of knock-out calls with a barrier of


Let S= $40, K= $45, alpha=.3, r=.08, delta=0, and T= (.25, .5, 1, 2, 3, 4, 5, 100).

a. Compute the prices of knock-out calls with a barrier of $38.

b. compute the ratio of the knock-out call prices to the prices of standard calls. Explain the pattern you see.

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Financial Management: Compute the prices of knock-out calls with a barrier of
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