Call Option The annual interest rate is 10%. Someone offers you a call option that will give you the right (but not the obligation) to buy one stock for $150 next year. There is a 50% chance the stock will be worth $125 next year too. There is a 25% chance the stock will be worth $225 and a 25% chance the stock will be worth $25.  

What is the present discounted value of the call option?  

What would the present discounted value of the call option be if instead there is a 50% chance the stock will be worth $225 and a 50% chance the stock will be worth $25.  

Compare how the change affects the average value of the stock to the value of the call option.