Question: Suppose that S 0 = $ 5 0 , d = 0 . 8 , u = 1 . 2 5 , X = $

Suppose that S0= $50, d =0.8, u =1.25, X = $50, T =0.25, and the effective
annual riskfree rate is rf =5%. Find the price of the call option and the delta
of the option
Question: Assume that the probability for the stock to go up is 60%. What are
expected returns of the stock and the call option?

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