Currently , Goldstar Inc. is trading at $ 5.85 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 5 % and will remain constant . Use the binomial model to calculate the value of a two - year European call option on Goldstar Inc. with a strike price of $ 7.00

a. 1.20

b. 1.36

c. 0.92

d. 0.70 (this is the wrong answer) the right answer should between a, b, or c