What is the current equilibrium price of the call option

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A stock has a begining market value of $75. It can either increase in value each year by 20% or decrease in value by 20%. A 3-year European Call Option written on the stock has an exercise price of $75. The risk-free rate of return is 5% per year. What is the current equilibrium price of the call option if you maintain a riskless portfolio by readjusting positions in stock and puts at the end of each year? Draw the tree diagram and show ALL work. Please explain the entire process.

Reference no: EM131332823

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