Question: Consider a two-period binomial setting. The current stock price is $48.6 in each period, the stock may increase by 1.2 or decrease by 0.84. One

Consider a two-period binomial setting.

The current stock price is $48.6 in each period, the stock may increase by 1.2 or decrease by 0.84. One plus the risk-free, rf is 1.02. The risk-free rate applies to each period within the two-period setting.

What is the initial value of a call option with a strike price of $49?

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