Question: You are attempting to value a call option with an exercise price of $107 and one year to expiration. The underlying stock pays no dividends,

You are attempting to value a call option with an exercise price of $107 and one year to expiration. The underlying stock pays no dividends, its current price is $107, and you believe it has a 50% chance of increasing to $125 and a 50% chance of decreasing to $89. The risk-free rate of interest is 8%. Calculate the call options value using the two-state stock price model.

Call Option's Value:

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