Question: 2) Use the binomial tree model to estimate the price of an ECO based on the following: [10 points] a) Stock price is $30.

2) Use the binomial tree model to estimate the price of an

2) Use the binomial tree model to estimate the price of an ECO based on the following: [10 points] a) Stock price is $30. b) Strike price is $30. c) Risk-free rate is 5%. d) Stock volatility is 17%. e) Maturity is 1 year. f) Number of periods is 1. g) Pays no dividends. 3) What will happen to the option price if the volatility went up to 27%? [10 points] 4) What will happen to the option price if the stock pays 1.5% assuming volatility is 17%. [10 points]

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