(EXCEL PLEASE )The current price of American Airlines stock is $6. In the next year, this stock price can either go up by $3.50 or go down by $2. The stock pays no dividends. The one- year risk-free interest rate is 3% and will remain constant.

a) Calculate the risk-neutral probabilities.

b) Use the risk-neutral probabilities you found in part a) to calculate the price of a one-year call option on American Airlines stock with a strike price of $7.