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The current price of a non-dividend-paying stock is $17.69 and you expect the stock price to either go up by a factor of 1.135 or
The current price of a non-dividend-paying stock is $17.69 and you expect the stock price to either go up by a factor of 1.135 or down by a factor of 0.881 over the next 0.4 years. A European call option on the stock expires in 0.4 years. Its strike price is $18. The risk-free rate is 6% (annual, continuously compounded). What is the value of the option?
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