Suppose that we are trying to value a three-period call option on a stock that will either

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Suppose that we are trying to value a three-period call option on a stock that will either go up by 7 percent or down by 4 percent per period, that the exercise price of the option is $35, that the current stock price is only $35 per share, and that the going risk-free rate is 4 percent per period. Use the binomial option pricing model to answer the following questions:

What will be the value of the call today?

a. $4.03

b. $6.27

c. $6.45

d. $7.76

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