Question: You use the following information to construct a binomial forward tree for modeling the price movements of a stock: (i) The length of each period

You use the following information to construct a binomial forward tree for modeling the price movements of a stock:

(i) The length of each period is 1 year.

(ii) The current stock price is 190.

(iii) The stock’s volatility is 30%.

(iv) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 5%.

(v) The continuously compounded risk-free interest rate is 3%.

Calculate the price of a 3-year 150-250 European strangle.

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