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A stock with a current price of $300, can go either up by 25%, or down by 20%. You have the opportunity to buy

A stock with a current price of $300, can go either up by 25%, or down by 20%. You have the opportunity to buy an American call option on this stock for $65, which matures at the end of two periods, with an exercise price of 275. Please draw the trees of the stock and option values What is the price of the call option today if the risk free rate is 8%. What is your decision for this investment opportunity? Explain your answer a- b- C-

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a Here is the tree diagram representing the stock and option values S 300 S 375 S 240 S 468 S 300 S 288 S 192 C 65 C C C C C C b To calculate the pric... blur-text-image

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