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The price of Marx Inc. stock will be either $100 or $140 at the end of...

The price of Marx Inc. stock will be either $100 or $140 at the end of the year. Call options are available with 3 months to expiration. T-bills currently yield 3 percent. The current price of Marx stock is $120. Use the Binomial model to find the value of a call option if the exercise price is $130 per share.

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Answer #1

=(((1+3%)^(3/12)-100/120)/(140/120-100/120)*MAX(140-130,0)+(1-((1+3%)^(3/12)-100/120)/(140/120-100/120))*MAX(100-130,0))/(1+3%)^(3/12)
=5.184061596

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