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Value of a european call option with an exercise price

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What is the value of a European call option with an exercise price of $40 and a maturity date six months from now if the stock price is $28, the instantaneous variance of the stock price is 0.5 and the risk-free rate is 6%? Use both a) a two-steps binomial tree, b) the Black-Scholes pricing formula.

Reference no: EM132025251

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