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You are attempting to value a call option with an exercise price of $125 and one year to expiration. The underlying stock pays no dividends, its current price is $125, and you believe it has a 50% chance of increasing to $160 and a 50% chance of decreasing to $90. The risk-free rate of interest is 7%. Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value of the call $

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92369727

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