Hi,

I'm having difficulties in calculating the answer to the below problem. I must be missing some detail somewhere but I just don't get the correct result.

Please provide the solution with the actual calculation values.

Thanks!

A stock is selling for $32.70. The strike price on a call, maturing in 6 months, is $35. The possible

stock prices at the end of 6 months are $39.50 and $28.40. If interest rates are 6.0%, what is the

option price?

(a) $1.90

(b) $2.80

(c) $3.40

(d) $4.20

Answer: C