Binomial Pricing: Assume That the Shares of New Wave Property

Binomial pricing: Assume that the shares of New Wave Property are currently trading for $16 and will either rise to $50 or fall to $2 in one year. The risk-free rate for one year is 8 per cent. You own a portfolio that consists of one call option and one put option. Both options have a strike price of $15, and both expire in one year. What is the value of your portfolio?

A) $0
B) $15
C) $21.40
D) $18.52