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(Binomial Model) A current stock price is $50. It is known that at the end of 6 months it will be either $60 or $42.

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(Binomial Model) A current stock price is $50. It is known that at the end of 6 months it will be either $60 or $42. The risk-free rate of interest with continuous compounding is 12% per annum. Calculate the value of a 6-month European call option on the stock with an exercise price of $48 in two ways: a) Non-arbitrage arguments; b) Risk-neutral valuation

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