2) Consider the following binomial option pricing problem involving a call. This call has one period to go before expiring. Its stock price is $45, and its exercise price is $49.50. The risk-free rate is 0.05%, the value of u is 1.25, and the value of the d is .95. Construct the 1-period binomial tree model and find the value of the call premium using:

Probability method (Method 2).

Group of answer choices

a) 2.04

b) 4.50

c) 2.14

d) 3.35