10. Hopkins Pharmaceuticals stock is currently priced at $40 per share. Six months from now its price will be'either $44.21 or $36.19. If the price rises to $44.21, then six months later the price will be either $48.86 or $40. If, however, the price initially falls to $36.19. then six months later the price wiII be ei ther $40 or $32.75.

The riskfree rate (continuously compounded) is 3.05% over each six-month period.

Use the binomial option pricing model to determine the fair value of a one-year call option on Hopkins stock.