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CFA Level 2
Derivatives

Value of a Call Option in a Binomial Model

Very Easy Option Valuation Binomial Models

Consider a call option on a stock that currently has a price of $50. The stock can either increase to $60 or decrease to $45 in a one-period binomial model. The risk-free interest rate is 5% per period. What is the value of the call option at the end of the period, assuming the strike price of the option is $55?

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