Problem $16-35($Algo$)$

Required:

You are attempting to value a call option with an exercise price of $$120$ and one year to expiration. The underlying stock pays no

dividends, its current price is $$120,$ and you believe it has a $50\%$ chance of increasing to $$150$ and a $50\%$ chance of decreasing to $$90.$

The risk$-$free rate of interest is $6\%.$ Consider one share of stock and two written calls. Calculate the call option's value using the two$-$

state stock price model. $($Do not round intermediate calculations. Round your answer to $2$ decimal places.$)$

Answer is complete but not entirely correct.