Find the sequence of stock prices for the two period

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Question:

Consider a two period Binomial Model. If the current stock price of $50 and the risk free rate is 4%. For each period the stock can go up to 15% and down by 5%. The exercise price of this call option is $45.

A) Find the sequence of stock prices for the two period?

B) Find the value of call at the end of first period and the value of call at the end of second period ( that is show the Call Price Path ) for the two period model. Why is there a difference in the value of call?

Reference no: EM132395501

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