Consider Facebook stock which is trading today at $3,000. The stock price can either go up by 20% or down by 20% in the next year. There is a 60% chance that we end up in the upstate and a 40% chance that we go down. There is no arbitrage in this economy. What is the fair price of a call option written on Facebook stock with an exercise price of $3100 that matures exactly in one?

There are two at-the-money options trading on Google stock in this economy. A call option with a premium of $214.29 and a put option with a premium of $71.43. Both Google options have a strike price of $3,000and expire one year from today.

Answer Options:

71.43

35.71

142.86

297.62

95.24