A stock price is currently 50 it is known that at the end


A stock price is currently $50. It is known that at the end of six month, it will be either $60 or $40. The risk-free rate of interest with continuous compounding is 12% per annum. Calculate the value of a six-month European call option on the stock with an exercise price of $45, using binomial model and (a) no-arbitrage argument, and (b) risk-neutral valuation approach.

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Financial Management: A stock price is currently 50 it is known that at the end
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