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Problem:

The current price of a stock is $20. In 1 year, the price will be either $26 of $16. The annual risk-free rate is 5%.

Required:

Question: Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year.

Note: Please provide reasons to support your answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171397

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