Suppose Carol's Stock Price Is Currently $20

Multiple Choice

Suppose Carol's stock price is currently $20. In each six-month period it will either fall by 50 percent or rise by 100 percent. What is the current value of a one-year call option with an exercise price of $15? The six-month risk-free interest rate is 5 percent per six-month period. [Use the two-stage binomial method.]

A) $8.73
B) $10.03
C) $16.88
D) $13.33