4. (14 points) Assume a two-step binomial model. A stock is currently selling at $90. The stock can go up or down by 25% in each time step. The riskless rate is 5% per annum. Assume the stock pays no dividends. a. (7 points) What is the price of a 6-month European put option with a strike of 80? b. (3 points) What is the price of a 6-month European call option with a strike of 80? C. (4 points) Assume the stock were to pay a dividend in three months. How does that affect the price of the call and put options? Will they be more/less expensive or unchanged in price? Explain. (there is no need to calculate the new price) 4. (14 points) Assume a two-step binomial model. A stock is currently selling at $90. The stock can go up or down by 25% in each time step. The riskless rate is 5% per annum. Assume the stock pays no dividends. a. (7 points) What is the price of a 6-month European put option with a strike of 80? b. (3 points) What is the price of a 6-month European call option with a strike of 80? C. (4 points) Assume the stock were to pay a dividend in three months. How does that affect the price of the call and put options? Will they be more/less expensive or unchanged in price? Explain. (there is no need to calculate the new price)