Part II (Binomial Tree) ai’ 1. Compute the price of a call option using the stock…

Part II (Binomial Tree) ai’ 1. Compute the price of a call option using the stock price tree u1.4634 and d=0.7317. The stock price is $38. The strike price is 840 and the interest rate is 8%. The time-period is 6 month. Use a 2 stage binomial tree 2. Assume that where ?-8%, the dividend yield ?. 0, ? is the annual standard deviation and ?VE is the standard deviation over a period of length h. The initial stock price is 341 . Here, sigma-30% and the maturity T:h a) Use the binomial tree to find the price of a 40 strike price call option with matutity T-1 b) Use the binomial tree to find the price of a 40 strike price call option with matutity T-2 c) Use the binomial tree to find the price of a 40 strike price call option with matutity T-3