Use the following European call option’s information.K=$60, S 0=$70, T=7.5 months, r=6%, Standard Deviation=12%a.)Find the probability of an up movement (P) based on the risk-neutral valuation.b.)Find the European call option’s price using the risk-neutral valuation.c.)Suppose that you use the real-world valuation rather than the risk-neutral valuation. The real-world interest rate for this call option contains some risk premium and it is estimated at 20% now. Assuming that the call option’s price obtained from part b) does not change, the others being held constant , find the probability of an up movement in the real-world valuation.
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