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New to finance questions and reading from 150 Most Frequently Asked Questions on Quant Interviews. In the solutions section of this book, it says:

In the plane (K,P(K)) the options values correspond to the points (30,6), (20,4), and (0,0) which are on the line P(K) = (2/3)K.

I feel like I am missing something obvious about the problem, because all three of those points lie on the line P(K) = (1/5)K. It looks like 2/3 of point one gives point two but that is not equivalent.

Does anyone have any insight? Thank you!

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  • The 2/3 is a typo and should be 1/5 as you correctly wrote. The answer is here and is based on strict convexity of the call option price as a function of strike.
    – AKdemy
    Commented Jul 11, 2023 at 17:38
  • Thanks AKdemy! thought I was going crazy
    – OliviaV
    Commented Jul 17, 2023 at 19:42

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