Calculate the value of a six-month european call option

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Reference no: EM131996514

A stock price is currently $50. It is known that at the end of six months it will be either $60 or $42. The risk-free rate of interest with continuous compounding is 12% per annum.

Calculate the value of a six-month European call option on the stock with an exercise price of $48.

Verify that no-arbitrage arguments and risk-neutral valuation arguments give the same answers.

Reference no: EM131996514

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