Consider a European call option with an exercise price of Pc = $100. At t = 1, X will be $110 with probability 0.5 and $90 with probability 0.5. What is the value of the call option at t = 1? 2. Assume the underlying asset in the option now displays increased price volatility so that although the expected (mean) price is unchanged, X will be $160 with probability 0.5 and $40 with probability 0.5. (a) What is the price of the call option at t = 1? (b) How does volatility affect the option price?