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 $85 and one year until expiration. Currently, Southeastern’s stock sells for $85 per share. In one year, Ken knows that Southeastern’s stock will be trading at either $102 per share or $71 per share. Ken is able to borrow and lend at the risk-free EAR of 2.5 percent.

a. What should the call option sell for today? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Call option price $

b. What is the delta of the option? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Delta of the option $

c. How much would Ken have to borrow to create a synthetic call? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Synthetic call $

d. How much does the synthetic call option cost? (Do not round intermediate calculations and round your final answer to 2 decimal places (e.g., 32.16).)

Call option price $