The price of Time Squared Corp. stock will be either $65 or $85 at the end of the year. Call options are available with one year to expiration. T-bills currently yield 5 percent.
Requirement 1: Suppose the current of Time Squared stock is $70. What is the value of the call option if the exercise price is $60 per share?
Requirement 2:
Suppose the exercise price is $75 in requirement 1. What is the value of the call option now?
Please write the formula that you used