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The current price of a stock is $1000 and has a volatility of 40%. The risk-free rate is 5%. Value a European one-year call option

The current price of a stock is $1000 and has a volatility of 40%. The risk-free rate is 5%. Value a European one-year call option with a strike price of 800 using a two-step tree. Compare your findings with the Black and Scholes price of this option. Answer the same questions assuming a put option. Compare and explain.

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