You work on a proprietary trading desk of a large investment bank, and you have...
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You work on a proprietary trading desk of a large investment bank, and you have been asked for a quote on the sale of a call option with a strike price of $46 and one year of expiration. The call option would be written on a stock that does not pay a dividend. From your analysis, you expect that the stock will either increase to $64 or decrease to $34 over the next year. The current price of the underlying stock is $46, and the risk-free interest rate is 4% per annum. What is this fair market value for the call option under these conditions? Do not round intermediate calculations. Round your answer to the nearest cent.
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