Determining what value to place on call option for your firm

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Your group has been assigned task of determining what value to place on call option for your firm. The current stock price per share is $54.52. Six months from now management believes the stock price will either fall by 25% or rise by 33%. Using this information, determine what a 6 month call should be valued at if the risk free rate of return is at 2% annually. Banks will loan you at .5% over the risk-free rate. Using option equivalents from common stock and borrowing, determine the price of the call option to submit to management.

Reference no: EM131308280

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