. Assume that a stock price is currently at S = $40. It is known...
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. Assume that a stock price is currently at S = $40. It is known that in one year stock price will be either $50 or $30. The annual interest rate is rf = 5%. Using a one-period risk neutral valuation method, what is the fair price of a European call option with strike price X = 45 and 1 year to maturity? A. 2.50 B. 1.50 C. 2.65 D. 2.86 E. 2.95
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