Replicate problem 8-6 with these new inputs. The current price of a stock is $48. In 1 year, the price will be either $55 or $31. The annual risk-free rate is 6.6%. Find the price of a call option on the stock that has a strike price of $50 and that expires in 1 year. ( Use daily compounding.)

Inputs P₀ =

X =

C_u =

C_d =

Use the Binomial Model 4-step approach

Step 1 N_s =

Step 2 Payoff =

Step 3 PV(payoff) =

Step 4 Price for N shares

V_c =

Use the Binomial Model Formula Approach (single-period, thus n=1)

e^rt/n =

_u =

_d =

V_c =

Use the same Binomial Formula to price an option with the same chararistics but with strike price of $45.

C_u =

C_d =

V_c =