Using the binomial option pricing model, 1. Calculate the value of the call if S = $95,

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Question:

Using the binomial option pricing model,

1. Calculate the value of the call if S = $95, X = 80, and the stock can either be worth $140 or $60 one year from now. Assume that the risk-free rate is 10%.

2. Without having to perform the calculation if the stock prices one year from now were $90 and $70, would the value of the call be greater or less than the previous value? Explain.