Calculate the value of call option

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Reference no: EM132820660

Question - The current stock price of Tata Motors (formerly Telco) is Rs.400 and the market expectation about this stock is that it's value may increase or decrease by 20% in each of the next two half- years. The return on Government Securities being traded in the market for the same maturity is 5% and investors can exercise the European call option on Tata Motors stock at Rs.420. Assuming that each time step is six months, you are required to calculate the value of call option using Two - Step Binomial model.

Reference no: EM132820660

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