Currently , Goldstar Inc. is trading at $ 5.34 per share . You estimate that in the next two years , the stock price of Goldstar can either go up by $ 2.50 or go down by $ 2.00 . Goldstar Inc. pays no dividends . The one - year risk - free interest rate is 4.8 % and will remain constant . Use the binomial model to calculate the value of a two - year European put option on Goldstar Inc. with a strike price of $ 7.00 .

a. 1.78

b. 1.24 ( this the wrong answer. a, c, d on of them is the right answer)

c. 1.84

d. 1.96