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European call option written on southeastern airlines

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Reference no: EM132419007

Ken is interested in buying a European call option written on Southeastern Airlines, Inc., a non-dividend-paying common stock, with a strike price of $60 and one year until expiration. Currently, the company's stock sells for $62 per share. Ken knows that, in one year, the company's stock will be trading at either $73 per share or $49 per share. Ken is able to borrow and lend at the risk-free EAR of 2.5 percent. What should the call option sell for today?

Reference no: EM132419007

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