Question: Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The

Consider a binomial world in which the current stock price of 80 can either go up by 10 percent or down by 8 percent. The risk-free rate is 4 percent. Assume a two-period world, and each period is one year. Consider a call with an exercise price of 80.

What is the current value of the call?

Select one:

a. 8.00

b. 7.30

c. 11.13

d. 0.619

e. none of the above

The correct answer is 7.30. How do we get this answer without using an excel format?

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