The call expires in six months and the risk-free rate is 2, Financial Management

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The call expires in six months and the risk-free rate is 2

Assume a stock sells for $62 today. In six months it may rise to $70 or it may fall to $54.

(A) Use the binomial model to calculate the price of a call option on this stock with a strike price of $58. The call expires in six months, and the risk-free rate is 2% per year.

(B) The call expires in six months, and the risk-free rate is 2% per year. What is the risk-neutral probability that the stock price moves to $70?

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Financial Management: The call expires in six months and the risk-free rate is 2

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