Valuation of call option, A European Call Option on a non

Valuation of call option

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Reference no: EM1367135

A European Call Option on a non dividend paying stock where stock value is $40, the strike price is $40, the risk-free rate is 4 percent per annum, the volatility is 30 percent per annum, and the time to maturity is 6-mo.

a) Calculate u, d, and p for a two-step tree

b) Value the option using a two-step tree.

Reference no: EM1367135

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