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Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 5%

Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is 12 months. Use a two-step binomial tree to value the option.

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