The price of National Bank of Greece shares will be either €1.74 or €1.43 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 7 per cent.

(a) Suppose the current price of National Bank of Greece shares is €1.68. What is the value of the call option if the exercise price is €1.50 per share?

(b) Suppose the exercise price is €1.68 in part (a). What is the value of the call option now?