Question

You are attempting to value a call option with an exercise price of $75 and one year to expiration.

The underlying stock pays no dividends, its current price is $75, and you believe it has a 50% chance of increasing to $95 and a 50% chance of decreasing to $55. The risk-free rate of interest is 10%. Based upon your assumptions, calculate your estimate of the the call option’s value using the two-state stock price model. (Do not round intermediate calculations. Round your answer to 2 decimal places.)  

Value of the call           $   

Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"