Question: Solve Sample problem: One-period binomial model The current price of Liora Inc. stock is $40. In one year, the stock will either increase by 25%

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Sample problem: One-period binomial model The current price of Liora Inc. stock is $40. In one year, the stock will either increase by 25% or decrease by 20%. The stock pays no dividends. The one-year risk-free interest rate is 5%. Using the Binomial Model, what is the value of a one-year European call option on Liora stock with a strike price of $42? a. $4.23 b. $3.55 c. $8 d. $8.67

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