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What is the value of a european call option

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Consider a stock that currently sells for $40. Over each of the next two six-month periods, the stock will either increase by 15% or decrease by 15%. Semiannual risk-free rate is 3%. (Use risk-neutral probability approach.)

-What is the value of a European call option on this stock with an exercise price of $36 and expiration in one year?How would I solve this using the risk probability approach? I'm having a difficult time with the notes I have from class.

Reference no: EM133058467

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