In a One-Period Binomial Model, Assume That the Current Stock

Multiple Choice

In a one-period binomial model, assume that the current stock price is $100, and that it will rise to $110 or fall to $90 after one month. The risk-free gross return per time step is 1.001668. If a 98-strike call option is trading at $2, how much arbitrage profit can you make in present value terms?

A) $2.09
B) $4.09
C) $6.09
D) $12.09