Compute today european call option price

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Suppose an option matures after T=l year and has a strike price of $55, the stock price is $60. The stock price evolves according to the Cox-Ross-Rubinstein specification in this two-period model, the yearly volatility is = 0.3 and the continuously compounded risk-free interest rate is 5 percent per year.

i. Compute today's European call option price in this 2-period tree.

ii Assuming it is an American option when would it be optimal to exercise?

Reference no: EM133067776

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