Suppose ABC's stock price is currently $25.In the next six months it will either fall to $15 or rise to $40.What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate).[Use the risk-neutral valuation method.]
A)$20.00
B)$8.57
C)$9.52
D)$13.10

Question

Quizplus · Accepted Answer

The Answer of Suppose ABC's stock price is currently $25.In the next six months it will either fall to $15 or rise to $40.What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5% (periodic rate).[Use the risk-neutral valuation method.]
A)$20.00
B)$8.57
C)$9.52
D)$13.10

Suppose ABC's Stock Price Is Currently $25