The Current Price of a Stock Is 40

Multiple Choice

The current price of a stock is 40.After one period,it will be worth either 41.80 or 38.20 with probabilities 0.60 and 0.40,respectively.The risk-free rate of interest over this period,in gross terms,is 1.05 (i.e. ,a dollar invested at the beginning of the period returns 1.05 at the end of the period) .The no-arbitrage value of a one-period call option on this stock with a strike of 40

A) is approximately 1.03.
B) is approximately 1.81.
C) can be anything between 0 and 1.80.
D) does not exist in the given setting.