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A stock price So is currently $25. It is known that at the end of two months it will be either $23 or $27. The

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A stock price So is currently $25. It is known that at the end of two months it will be either $23 or $27. The risk-free interest rate is 10% per annum with continuous compounding. Suppose S, is the stock price at the end of two months. What is the value of a derivative that pays off max (ST(S7 S.), 0) at this time? (Hint: risk neutral valuation formula is a general formula, not just for pricing options.)

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