The price of AT&T stock is currently $25. In each of the next two years, the stock price is expected to rise or fall by 20%. The stock pays no dividends. The one-year risk-free interest rate is 6% and is unlikely to change. Using the Binomial Tree, calculate the price of a one- year European call option on AT&T stock with a strike price of $25, using a) the portfolio replication approach, b) the risk neutral valuation approach. Leave your answers to 2 decimal places.
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