Suppose that a stock price is $10.00 per share at current time and at the end...

Suppose that a stock price is $10.00 per share at current time and at the end of three months the stock price may either move up to $11.00 per share or down to $9.00 per share. Consider a European call option which allows you to buy the stocks at $10.50 per share at the end of three months. The risk free rate is 12% per year.

Find the fair price for the option.

Expert Solution

jeff jeffy answered 2 months ago

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