A Stock with a Current Price of $37 Will Either

Multiple Choice

A stock with a current price of $37 will either move up by a factor of 1.20 or down by a factor of .80 each period over the next two periods. The risk-free rate of interest is 4%. What is the current value of a call option with a strike price of $40?

A) $4.16
B) $4.42
C) $4.71
D) $5.09
E) $5.13