# Fight Finance

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A one year European-style call option has a strike price of $4. The option's underlying stock pays no dividends and currently trades at$5. The risk-free interest rate is 10% pa continuously compounded. Use a single step binomial tree to calculate the option price, assuming that the price could rise to $8 $(u = 1.6)$ or fall to$3.125 $(d = 1/1.6)$ in one year. The call option price now is:

A one year European-style put option has a strike price of $4. The option's underlying stock pays no dividends and currently trades at$5. The risk-free interest rate is 10% pa continuously compounded. Use a single step binomial tree to calculate the option price, assuming that the price could rise to $8 $(u = 1.6)$ or fall to$3.125 $(d = 1/1.6)$ in one year. The put option price now is: