Call option value using the two-state stock price model

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Reference no: EM131556505

You are attempting to value a call option with an exercise price of $80 and one year to expiration. The underlying stock pays no dividends, its current price is $80, and you believe it has a 50% chance of increasing to $90 and a 50% chance of decreasing to $70. The risk-free rate of interest is 5%. 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.

Reference no: EM131556505

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