Binomial pricing: Assume that the stock of Malcolm's Mufflers, Inc., is currently trading for $43 and will either rise to $55 or fall to $17 in one year. The risk-free rate for one year is 8 percent. What is the value of a call option with a strike price of $45?
A) $4.40
B) $5.84
C) $6.84
D) $7.17
Correct Answer:
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