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A stock is priced at 40 and the periodic risk-free rate of interest is 8 percent. What is the value of a two-period European call option with a strike price of 37 on a share of stock using a binomial model with an up factor of 1.20 and a (risk-neutral) up probability of 67 percent? A. $9.07. B. $20.60. C. $3.57. D. $9.25. |