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European call option with a strike price

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A stock price is currently $50. Over each of the next two three-month periods (one jump each 3-month) it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value (premium at time 0) of a six-month European call option with a strike price of $51?

(Binomal -> 2 period) -> Necessary to draw binomial tree for full credit

Reference no: EM131647435

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