(b) (6 points) The following one-period binomial stock price model was used to calculate the...
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(b) (6 points) The following one-period binomial stock price model was used to calculate the price of a one-year 10-strike call option on the stock. 12 10 8 You are given: The period is one year. The true probability of an up-move is 0.75. The stock pays no dividends. The price of the one-year 10-strike call is $1.13. Upon review, the analyst realize that there was an error in the model construction and that Sd, the value of the stock on a down-move, should have been 6 rather than 8. The true probability of an up-move does not change in the new model, and all other assumptions were correct. What is the actual price of the call option
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