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Answer must be A,B, or C to be correct. Please explain too.
Use two-state option pricing model to find the value of a call option and the intrinsic value given the following parameters:
T-bills yield: 3.8 pct.
Current stock price: $25.00
No possibility stock will be worth less this amount in one year: $22.00
Exercise Price: $12.00
A) Value of call = $13.44, Intrinsic Value = $13.00
B) Value of call = $13.44, Intrinsic Value = $3.00
C) Value of call = $10.44, Intrinsic Value = $13.00
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