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I want to learn how to calculate the call-value/price for the binomial model tree, so...

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Finance

I want to learn how to calculate the call-value/price for the binomial model tree, so that i can calculate the call and put option.

I just need to find out how to get the call value.

The current price of Natasha Corporation stock is $6. In each of the next two years, this stock

price can either go up by $2.50 or go down by $2. The stock pays no dividends. The one-year

risk-free interest rate is 2% and will remain constant. Using the Binomial Model

a) calculate the price of a two-year European call option on Natasha stock with a strike

price of $7.

b) calculate the price of a two-year European put option on Natasha stock with a strike

price of $7.

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