A stock is selling for $32.70. The strike price on a call, maturing in 6 months, is $35. The possible stock prices at the end of 6 months are $39.50 and $28.40. If interest rates are 6.0%, what is the option price?
(a) $1.90
(b) $2.80
(c) $3.40
(d) $4.20
Answer: c
Fin 402
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