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The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 3%.
The current price of a stock is $20. In 1 year, the price will be either $26 or $16. The annual risk-free rate is 3%. Find the price of a call option on the stock that has a strike price of $23 and that expires in 1 year. (Hint: Use daily compounding.) Assume a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent.
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