Question: Compute the call's value.
Following data for a single-period binomial model:
· A stock's price S is $50. After six months, it either goes up by the factor U = 1.22095341 or it goes down by the factor D - 0.79881010.
· Options mature after T = 0.5 year and have strike price K = $45.
· A dollar invested in the money market account earns continuously compounded risk-free interest at 2 percent per year.