Question: A binary option pays off R 2 4 0 if a stock price is greater than R 5 0 in six months. The current stock

A binary option pays off R240 if a stock price is greater than R50 in six months. The current stock price is R43, and its volatility is 35% per annum. The risk-free rate is 6%(continuously compounded) and the expected return on the stock is 11.5%(continuously compounded). Calculate the value of this option. (5)

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