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Business, 05.05.2020 08:34 brutusjohnson1

You are attempting to value a call option with an exercise price of $130 and one year to expiration. The underlying stock pays no dividends, its current price is $130, and you believe it has a 50% chance of increasing to $155 and a 50% chance of decreasing to $105. The risk-free rate of interest is 8%. Based upon your assumptions, calculate your estimate of the call option's value using the two-state stock price model.

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