Question: 10.8 Let S = $100, K = $95, = 30%, r = 8%, T = 1, and = 0. Let u = 1.3, d =

10.8 Let S = $100, K = $95, = 30%, r = 8%, T = 1, and = 0. Let u = 1.3, d = 0.8, and n = 2. Construct the binomial tree for a European put option. At each node provide the premium, , and B.

10.9 Repeat the option price calculation in the previous question for stock prices of $80, $90, $110, $120, and $130, keeping everything else fixed. What happens to the initial put as the stock price increases?

Question: End-of-Chapter Problem 10.9: Repeat the option price calculation in Problem 10.8 for a stock price of $80, keeping everything else fixed. What is the new premium? Find the closest price. [Reference: End-of-Chapter Problem 10.8]

Answers: 15.3, 16.3, 17.3, 18.3

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