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Calculating Option Values The price of ABC plc will be either 2 or 1.50 at the end of the year. Call options are available with

Calculating Option Values The price of ABC plc will be either 2 or 1.50 at the end of the year. Call options are available with one year to expiration. UK government bond yields are currently at 3 per cent. (a) Suppose the current share price of ABC plc is 1.74. What is the value of the call option if the exercise price is 1.75 per share? (b) Suppose the exercise price is 1.90 in part (a). What is the value of the call option now?

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