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A. You are attempting to value a call option with an exercise price of $102 and 1 year to expiration. The underlying stock pays no dividends, its current price is $102, and you believe it has a 50% chance of increasing to $121 and a 50% chance of decreasing to $83. The risk-free rate of interest is 10%. Calculate the call option’s value using the two-state stock price model.
B. You are attempting to value a call option with an exercise price of $102 and 1 year to expiration. The underlying stock pays no dividends, its current price is $102, and you believe it has a 50% chance of increasing to $121 and a 50% chance of decreasing to $83. The risk-free rate of interest is 12%.Calculate the call option's value using the two-state stock price model.
For Both (Do not round intermediate calculations and round your final answer to 2 decimal places. Omit the "$" sign in your response.)
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