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What a call spread tells you · Part 3 of 3
Three European calls on a stock at $100 share an expiry. The 95-strike trades at $8.20, the 100-strike at $5.50 and the 105-strike at $3.40. Take interest rates as zero.
Using only these three quotes, what is the most a digital call that pays $1 if the stock finishes above 100 can be worth without creating an arbitrage?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
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