Call option value using the two-state stock price model

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Reference no: EM131078104

You are attempting to value a call option with an exercise price of $65 and one year to expiration. The underlying stock pays no dividends, its current price is $65, and you believe it has a 50% chance of increasing to $90 and a 50% chance of decreasing to $35. The risk-free rate of interest is 8%. Based upon your assumptions, calculate your estimate of the the call option's value using the two-state stock price model.

Reference no: EM131078104

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