Find the price on a call option on the stock

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Reference no: EM131549071

The current price of Tiger stock is $20. In one year the price will either be $25 of $15. The annual risk-free rate is 5%. Using the binomial method, First, establish a hedged position, then find the price on a call option on the stock that has a strike price of $21, and that expires in one year. (Use continuous discounting, and show the binomial diagram).

Reference no: EM131549071

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