Question: Begin with the same setup as Example 22.2: Fuelcos investment in Project C. Now, suppose we believe that the volatility of the project is really

Begin with the same setup as Example 22.2: Fuelco’s investment in Project C. Now, suppose we believe that the volatility of the project is really 120 percent. With this high volatility, a 60-step tree may not be sufficiently precise. Edit the bintree spreadsheet to build a 100-step tree, and then compare the option values for N 5 60 and N 5 100. How different are these values? Do you think it is necessary to build an even larger tree? (This exercise will be time consuming. It is good practice if you want to learn how to build your own trees.)

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