b A stock is currently selling for #60. The call option on the stock exercisable a year from now at an exercise price of #55 is currently selling for #15. The risk-free interest rate is 12%. The stock can either rise or fall atter a year. Calculate the per cent of the stock rise Calculate the per cent of the stock fall

This problem can be solved using the one-period binomial option pricing model. We are given the current stock price ($S_0$), exercise price ($K$), time to expiration ($T$), current call option price ($C_0$), and the risk-free interest rate ($r$). We need to find the percentage rise and fall of the stock.

Given values:

• Current stock price, $S_0 = \#60$
• Exercise price, $K = \#55$
• Time to expiration, $T = 1$ year
• Current call option price, $C_0 = \#15$
• Risk-free interest rate, $r = 12% =