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The current price of Starbuck's stock is $22, and at the end of one year its price is expected to be either $37 or $12. The annual risk-free rate is 2.5%, based on daily compounding. A 1-year call option on the stock, with an exercise price of $23, is available.

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Question: Based on the binominal model, what is the option's value?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173248

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