Question: The interest rate is 2% per annum with continuous compounding and a bank wants to create a $1,000 principal protected note using a five-year zero-coupon

The interest rate is 2% per annum with continuous compounding and a bank wants to create a $1,000 principal protected note using a five-year zero-coupon bond plus a five-year call option.

What is the maximum price of the call option that will make this product viable for the bank (answer in $ and round to the nearest cent)?

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