Question: A stock is currently $ 7 0 . Over each of the next twelve one - month periods ( this is a 1 2 -

A stock is currently $70. Over each of the next twelve one-month periods (this is a 12-step binomial tree), it is expected to go up by 3% or down by 3%. The risk-free rate is 5% per annum with continuous compounding for all maturities. Value a one-year European call with a strike price of $55.
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