Problem:
The share value of Drummond, Griffin and McNabb, a New Orleans publishing house, is currently trading at $100.00 but is expected, 90 days from today, to have risen to $150.00 or to have declined to $50.00, depending on critical reviews of its new biography of Ezra Pound. Assuming the riskless interest rate over the next 90 days is .01, can you value a European call option written on a share of DGM stock if the option carries an exercise price of $85.00?