A stock with a current price of $37 will either move up by a factor of 1.20 or down by a factor of 0.80 each period over the next two periods. The risk-free rate of interest is 4 percent. What is the current value of a call option with a strike price of $40?

Multiple Choice

• $4.16

• $4.42

• $4.71

• $5.09

• $5.13