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The current price of a stock is 50 yuan. It is known that the stock price becomes 60 yuan or 42 yuan after 6 months,
The current price of a stock is 50 yuan. It is known that the stock price becomes 60 yuan or 42 yuan after 6 months, and the risk-free interest rate is 12 % per year ( continuous compound interest ). Please calculate the European call option price with an execution price of 48 yuan and a term of 6 months. And verify that the prices given by the no-arbitrage theory and the risk-neutral principle are equal.
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