Suppose that a stock price is currently $S$ dollars, and you set up a riskless portfolio which consists of shorting 1 European call option and purchasing an appropriate number of shares of the stock. Suppose it is known that six months from now, the price will be either 17 percent higher, where the option will have a value of 2 dollars, or the stock price will be 17 percent lower, where the option will be worthless. Find the value of the option now. Assume the option expires in six months, that no arbitrage opportunities exist, and a risk-free interest rate of 8 percent.
Answer = dollars.