Problem 21-36

You are attempting to value a call option with an exercise price of $107 and one year to expiration. The underlying stock pays no dividends, its current price is $107, and you believe it has a 50% chance of increasing to $125 and a 50% chance of decreasing to $89. The risk-free rate of interest is 8%. Calculate the call option's value using the two-state stock price model.(Do not round intermediate calculations. Round your final answer to 2 decimal places.)