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A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 8% with a probability
A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 8% with a probability of 50% or down by 4% with a probability of 50%. The risk-free interest rate is 4% per annum with continuous compounding. What is the value of a six-month European call option with a strike price of $50? Use binomial tree method to solve this problem.
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