Binomial pricing: Gizmo Motors shares are currently trading for $45 and will either rise to $47 or fall to $42 in one year. The risk-free rate for one year is 5 per cent. You own a call option with a strike price of $30, which expires in one year. What is the value of your call option?
A) 0
B) 2.27
C) 12.05
D) 16.43
Correct Answer:
Verified
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