Suppose ABC's Stock Price Is Currently $25

Multiple Choice

Suppose ABC's stock price is currently $25. In the next six months it will either fall to $15 or rise to $40. What is the current value of a six-month call option with an exercise price of $20? The six-month risk-free interest rate is 5 percent (periodic rate) . [Use the risk-neutral valuation method.]

A) $20.00
B) $8.57
C) $9.52
D) $13.10