Question: Suppose that u = 1.2, d = u1, R = 1.1, and S = 5 in the single-period binomial model. Calculate the premium of a

Suppose that u = 1.2, d = u−1, R = 1.1, and S = 5 in the single-period binomial model. Calculate the premium of a call option with strike price K = 5 and maturity T = 1. Also, calculate the premium of a put option with the same strike price and the same maturity so as to confirm the put–call parity (6.16).

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