Answer question 57 again, finding the value of the option if the stock goes up in 4 out of the 5 months.

Question 57

You are given the following information about a stock:

Calculate the value of the call option if the stock goes up in 3 out of the 5 months.

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S = $100 X = $101 r = .005 n = 5 u= 1.10 d = .95 Price of stock Exercise price for a call option on the stock Interest rate per month Number of months until the option expires Amount of increase if stock goes up Amount of decrease if stock goes down