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A stock is trading at Rs 4 0 . It is known that the price of the stock will be either Rs 4 2 or

A stock is trading at Rs

40 .

It is known that the price of the stock will be either Rs

42

or Rs

38

after

1

month. The risk free interest rate is

8 %

.

.

with continuous compounding. What is the value of a

30

day European call option with a strike price of Rs

39

based on the Binomial Option Pricing approach?

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