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A two-month American call option on a stock has a strike price of $40. The stock price is $42, the risk-free rate is 3% per

A two-month American call option on a stock has a strike price of $40. The stock price is $42, the risk-free rate is 3% per annum, and the volatility is 25% per annum. A dividend of $2 is expected in 1.5 months. Use a two-step binomial tree to calculate the option price.

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