Question: Problem 1 6 - 3 5 ( Algo ) Required: You are attempting to value a call option with an exercise price of $ 6

Problem 16-35(Algo)
Required:
You are attempting to value a call option with an exercise price of $60 and one year to expiration. The underlying stock pays no dividends, its current price is $60, and you believe it has a 50% chance of increasing to $95 and a 50% chance of decreasing to $25. The risk-free rate of interest is 7%. Consider one share of stock and two written calls. Calculate the call option's value using the twostate stock price model. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Answer is complete but not entirely correct.
\table[[Value of the call,S,56.07]]
Problem 16-35(Algo) Required: You are attempting to value a call option

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