Question: a) Explain how the Black-Scholes option pricing model builds on the binomial model. Where does it make extensions? Where is it similar? b) Use the

a) Explain how the Black-Scholes option pricing model builds on the binomial model. Where does it make extensions? Where is it similar?

b) Use the Black-Scholes formula to calculate the price of a call option given the following information: S = 50.1$ / , X = 55.1$ / , %1 r = , %2 = r ,T = 1, = 20% .

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