BA350 Financial Management: 8-6 (Binomial Model) The current price of a stock is $20. In 1 year

BA350 Financial Management

8-6 Binomial Model

The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 5%. Find the price of a call option on the stock that has a strike price of $21 and that expires in 1 year. (Hint: Use daily compounding.)
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