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Assume a stock is currently trading at 5 0 , and in one period the price will either go up by 2 5 % or

Assume a stock is currently trading at

50,

and in one period the price will either go up by

25 %

or fall by

13 % .

If the one

-

period risk

-

free rate is

5 %,

calculate the price of a European put option that expires in one period and has an exercise price of

50 ?

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