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A stock selling for $25 today will, in 1 year, be worth either $35 (up by 40%) or $20 (down by 20%). If the interest
A stock selling for $25 today will, in 1 year, be worth either $35 (up by 40%) or $20 (down by 20%). If the interest rate is 8%. This stock does not pay dividend. There is a 1-year European call option on the stock with exercise price $30. What is the value today of the call option? Use one-period binomial tree model and assume discrete discounting.
Up (Percentage of price change): 40% Down (Percentage of price change): -20%
Initial Stock Price: 25 Interest Rate: 8% Exercise Price: 30 Time to Maturity (Years): 1
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