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Explain price of a two-period european call option

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Consider a stock currently trading at $45. Suppose its price evolution can be represented by a binomial tree with u = 1.05 and d = 0.95. The risk-less rate per period is R = 1.01. Calculate the following: (a) The price of a two-period European call option with K = 43. (b) The price of a one-period call on the two-period call with a strike of K = 2. (c) The price of a one-period put on the two-period call with a strike of K = 0.50.

Reference no: EM132932961

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