Exhibit 22.6 Use the Information Below for the Following Problem(S)

Exhibit 22.6
Use the Information Below for the Following Problem(S)
The following information is provided in the context of a two period (two six month periods) binomial option pricing model. A stock currently trades at $60 per share, a call option on the stock has an exercise price of $65. The stock is equally likely to rise by 15% or fall by 15% during each six month period. The one-year risk free rate is 3%.
-Refer to Exhibit 22.6.Calculate the price of the call option after the stock price has already moved down in value once (Cd) .

A) $7.77
B) $14.35
C) $0
D) $4.21
E) $6.44