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A stock index currently stands at 300 and has a volatility of 20% per year. The risk-free interest rate is 3% per year and the
A stock index currently stands at 300 and has a volatility of 20% per year. The risk-free interest rate is 3% per year and the dividend yield on the index is 8%. Use a two-step binomial tree to value a six-month American call option on the index with a strike price of 295.
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