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The diagram below represents the price movement of a certain stock for 9 months. Using the binomial pricing model, calculate the value of a European
The diagram below represents the price movement of a certain stock for 9 months.
Using the binomial pricing model, calculate the value of a European call option on this stock with a strike price of $29. Assume that the risk free rate is 5% pa continuously compounded, that there are no arbitrage opportunities and that stocks are infinitely divisible. Give your answer in dollars and cents to the nearest cent.
Binomial Step
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