(ST1) Binomial Option Pricing The current price of a stock is $40. In 1 year, the price...

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(ST–1)

Binomial Option Pricing The current price of a stock is $40. In 1 year, the price will be either $60 or $30. The annual risk-free rate is 5%. Find the price of a call option on the stock that has an exercise price of $42 and that expires in 1 year. (Hint: Use daily compounding.)

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