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Homework answers / question archive / A 1-year European call option on a stock with a continuous dividend rate of 2%
A 1-year European call option on a stock with a continuous dividend rate of 2%. You are given:
The current price is 50 and the strike price is 55.
At the end of a year, the stock price will be either 40 or 60.
The risk-free rate is 5%.
Calculate the option premium.
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