Use two-step tree to value european call option

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Reference no: EM132037902

Today’s price of a non-dividend paying stock is $60. Use a two-step tree to value a European call option on the stock with a strike price of $60 that expires in 6 months. Each step is 3 months. The risk free rate is 5% per annum with continuous compounding. Assume that the option is written on 100 shares of stock, and that u = 1.15 and d = 0.85. Could you please show calculations.

Reference no: EM132037902

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