Question: Use the binomial option pricing model to price a call option. The option has a maturity of one year and a strike price of 95-1/8.
Use the binomial option pricing model to price a call option. The option has a maturity of one year and a strike price of 95-1/8. The current one year rate is 4% and it could either go up to 4.8% or down to 3-1/8%. Each rate has a 50-50 chance of occurring. Your answer should be in dollars to the nearest penny. So if your answer is five dollars and two cents, then enter 5.02. For this question, use discrete discounting (divide by 1.01 if the rate is 1%, rather than using e to the minus .01 )
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