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What is the current value of a six-month call option

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Reference no: EM132507527

Suppose Hewlett Packard's stock price is currently $20. In the next six months it will either fall to $10 or rise to $40.

What is the current value of a six-month call option with an exercise price of $12?

N.B. The six-month risk-free interest rate (periodic rate) is 5%. [Hint: Use the risk-neutral valuation method]

Group of answer choices

$13.33

$11.78

$9.78

$16.88

$10.28

Reference no: EM132507527

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