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Business, 03.12.2021 19:00 shygrl05

Consider a six-month European call option on a non-dividend-paying stock. The stock price is $30, the strike price is $29, and the continuously compounded risk-free interest rate is 6% per annum. The volatility of the stock is 20% per annum. 1) Value this option using the Black-Scholes formula. Illustrate each step in your calculation. 2) Use a one-step binomial tree to value this option. 3) Use a two-step binomial tree to value this option. 4) Compare the results from 2) to 3) with what you get using the Black-ScholesMerton formula.

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Consider a six-month European call option on a non-dividend-paying stock. The stock price is $30, th...
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