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Assuming current stock price of ABC Company is $100. Over each of the next two six-month periods, the price is expected to go up by

Assuming current stock price of ABC Company is $100. Over each of the next two six-month periods, the price is expected to go up by 10% or down by 10% during each six-month period. The risk-free interest rate is 8% per annum with annual compounding.

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Calculate the option premium for a one-year European call option with an exercise price of $90. Show your calculation steps. (8 marks)

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