Question: Suppose you are pricing a 2 - year call option whose strike price is K = 9 5 . Thecurrent underlying stock price is So

Suppose you are pricing a 2-year call option whose strike price is K=95. Thecurrent underlying stock price is So=100, and the stock price will either go up byu=1.2 or go down byd=0.8. The annualized risk-free rate (continuouslycompounding) is 5%. The underlying stock pays no dividend. Calculate the currentoption price using a two-period binominal pricing model (each period is one year)Please keep 3 decimal places for your result. Do not include a % sign.

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