5. Option pricing - Single-period binomial approach The value of an option can be calculated by using a step-by-step approach in the case of single periods or by using sophisticated formulas that can be cally created through a spreadsheet. In the real world, two possible outcomes for a stock price in six months is an assumption. The stock markets are volatile, and stocks move up and down based on market and firm-specific factors Consider the case of Solar Systems Inc. Sharm of Solar Systems Inc, a manufacturer of solar panels, se for $40.00. disting options allow for the option holder to purchase one additionat share at an exercise price of 530,00 (Assume that you get the option for free) The option will expire within one year We can assume that at that time there will be a 70% chance that Solar Systems Inc.'s shares will all for $56.00 and a 30% chance that the shares will be selling at $28.00 Based on the binomial approach, the expected end-term share pride and return on Solarsysteme Tre shares are: Based on the binomial approach, the range of payoff values at expiration for Solar Systems Inc. shares and options : $20.00 (share) and 530.00 (option) 525.00 (share) and $20.00 (option) 18.00 (share) and $15.00 (option) $28.00 and $26.00 (option) Based on the binomial approach, the expected end-term share price and return on SolarSystems Inc. shares are: Based on the binomial approach, the range of payoff values at expiration for Solar Systems Inc.'s shares and options is: O $20.00 (share) and $30.00 (option) $25.00 (share) and $20.00 (option) $18.00 (share) and $15.00 (option) $28.00 (share) and $26.00 (option) Given this information, it is possible to create a riskless portfolio by selling one option and purchasing Assuming that the risk-free rate is 8% and is compounded daily, current option price (V) of the call option is