The stock of DEF Inc. is currently selling for S0 = $40. The stock price will either increase by a factor of u = 1.5 to $60 or fall by a factor of d = 0.5 to $20 by year end. The call option has a strike price of $50 and a time to expiration of one year. The risk-free interest rate is 5% p.a. Compute the price of a call option written on the stock of DEF Inc.
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