Assume that the annual interest rate, r, is equal to 1%. Also assume that the annualized volatility

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Assume that the annual interest rate, r, is equal to 1%. Also assume that the annualized volatility on the asset is 10%. Using a binomial tree, price a digital option expiring in 3 years that pays $1 if the asset price is above 55. The current stock price is $50. Use a three period tree, with each period spanning a year.
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