A Stock with a Stock and Exercise Price of $20

A stock with a stock and exercise price of $20 can either increase to $26 or decrease to $18 over the course of one year. In a one-period binomial option model, given an interest rate of 5% and equal probabilities, what is the likely option price? (Use annual compounding.)

A) $2.36
B) $2.50
C) $2.88
D) $3.00