Assume that the XYZ stock pays no dividend and is currently priced at $S_0=$$$40.$ As$-$

sume that, at time $T>0,$ the stock price goes up to $u{S}_0$ with probability $d{S}_{0}1-$pduT$$50$$$10$$$40$$$13$$$35d<mn\; id="EditorElement\_3128871">1</mn>$ but $do$ not know $doru.$

Assume that there $isno$ arbitrage and the interest rate $is$ zero. Consider the following three

options with the same expiry $Ton$ the $XYZ$ stock. Assume that a European call option

with strike price $$50is$ priced $at$ $$10$ while a European call option with strike price $$40is$

priced $$13.$ What $is$ the fair value $of$ a European call option with a strike price $of$ $$35?$

Explain your answer$\mathrm{.}0$ and

down $tod{S}_0$ with probability $1-p.We$ know that $d<mn\; id="EditorElement\_3129710">1</mn>$ but $do$ not know $doru.$

Assume that there $isno$ arbitrage and the interest rate $is$ zero. Consider the following three

options with the same expiry $Ton$ the $XYZ$ stock. Assume that a European call option

with strike price $$50is$ priced $at$ $$10$ while a European call option with strike price $$40is$

priced $$13.$ What $is$ the fair value $of$ a European call option with a strike price $of$ $$35?$

Explain your answer.