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Question Two (a) A six-month European Call option on a non-dividend paying Stock Index has a strike price of $4900. The index price is

Question Two (a) A six-month European Call option on a non-dividend paying Stock Index has a strike price of $4900. The index price is $5000, the risk-free rate is 5% per annum, and the value of u and d are 1.06 and 0.94, respectively. Use a two-step binomial tree to calculate the option price. (15 marks)

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