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The current price of OMV stock is 5.65. In each of the next two years this stock price will either go up by 2.50 or

image text in transcribed The current price of OMV stock is 5.65. In each of the next two years this stock price will either go up by 2.50 or go down by 2. Assume that the stock pays no dividends and that the one-year risk-free rate of interest is 3.2% and will remain constant. Using the binomial tree model calculate the risk-neutral probabilities and then use them to value a two-year call option on OMV stock with a strike price of 7

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