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The stock of Splish Brothers is currently trading for $40 and will either rise to $48...



The stock of Splish Brothers is currently trading for $40 and will either rise to $48 or fall to $36 in one month. The risk-free rate for one month is 1.5 percent. What is the value of a one-month call option with a strike price of $40? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25.)

Value of a call option is $
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Answer #1

Value of call option=((1+1.5%-36/40)/(48/40-36/40)*MAX(48-40,0))/(1+1.5%)
=3.0213465

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