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Assume that the price of Socates Motors stock will either rise to $50 or fall to...

Assume that the price of Socates Motors stock will either rise to $50 or fall to $35 in one month and that the risk free rate for one month is 1.5%. How much is an option with a strike price of $40 worth if the current stock price if the current stock price is $45 instead of $40?

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Sorry for making calculation error in solving the answer. Have corrected the answer and have uploaded the new image with new call value as = $ 7.44

Please find the correct answer .

jeff jeffy answered 2 years ago
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