You are thinking about buying a call option with a strike price of $50 which expires in 2 years (t-2). The underlying asset is currently valued at $50 and is expected to follow a binomial process as shown in the figure below with equal probability at each branching of the tree. The annual discount rate is 11%. What is the payoff to the call option in t=2 if the underlying asset is $50 in year 2? t=0 t=1 t=2 0 0 0 $50 $50 $100 $0 $30 70 35 100 50 25

You are thinking about buying a call option with a strike price of $50 which expires in 2 years (t2). The underlying asset is currently valued at $50 and is expected to follow a binomial process as shown in the figure below with equal probability at each branching of the tree. The annual discount rate is 11%. What is the payoff to the call option in t=2 if the underlvine asset is $50 in viar 30 $50$100$0$30