In: Finance
Suppose that a stock price is $10.00 per share at current time and at the end of three months the stock price may either move up to $11.00 per share or down to $9.00 per share. Consider a European call option which allows you to buy the stocks at $10.50 per share at the end of three months. The risk free rate is 12% per year.
Find the fair price for the option.