Question: Consider the three-period binomial model with S0 D 16, u D 3, d D 1=2 and r D 1=3. An American limited liability call option

Consider the three-period binomial model with S0 D 16, u D 3, d D 1=2 and r D 1=3. An American limited liability call option pays minf.Sn 10/C; 60g if exercised at time 0 n 3. In words it is a call option but your profit is limited to

$60. Find the value and the optimal exercise strategy.

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