Francis is long the underlying and has sold h number of call options with the following binomial tree:

Given the current asset price is $20 and r is 5%,what is the price of the above call option?
A) $2.86
B) $0.60
C) $21.43
D) −$21.43

Question

Francis is long the underlying and has sold h number of call options with the following binomial tree:
  
Given the current asset price is $20 and r is 5%,what is the price of the above call option? 
A) $2.86 
B) $0.60 
C) $21.43 
D) −$21.43

Quizplus · Accepted Answer

H = (25-15)/ (25 - 20)= 2,C = 1/h [S - (Sd/(1+r)] = 2.86

Francis Is Long the Underlying and Has Sold H Number