Exhibit 22.5 Use the Information Below for the Following Problem(S)

Exhibit 22.5
Use the Information Below for the Following Problem(S)
The information provided is relevant in the context of a one period (one year) binomial option pricing model. A stock currently trades at $50 per share, a call option on the stock has an exercise price of $45. The stock is equally likely to rise by 25% or fall by 25%. The one-year risk free rate is 2%.
-Refer to Exhibit 22.5.Calculate the price of the call option today (C₀) .

A) $7.56
B) $17.48
C) $9.26
D) $5.0
E) $17.15