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Finding the price of a call option on the stock

Question:

The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and theat expires in 1 year. (Hint: Use daily compounding.)

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Finance Basics: Finding the price of a call option on the stock

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Prepared by a verified Expert

Finance Basics: Finding the price of a call option on the stock

Reference No:- TGS02074427

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