1 Stock Z is trading at $50 today. In one year, the value will go either up to $62.50 or down to $40. A call option on Z with exactly one year to expiration has a strike price of $55. Inflation is high, so the interest rate is 10% per year.

Find the value of the call option next year if the stock price goes up.

a. 7.50

b. 0

c. 22.50

d. 12.50