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Find a fair value for the call option

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Problem 1: The one year call option on Caddo Inc. stock has an exercise price of 42. The current value of Caddo is 47. On the maturity date, the value of Caddo will be either 51 or 43. The risk free rate is 5%. Use the binomial option pricing model to find a fair value for the call option.

Reference no: EM132745108

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