4. For a two-period binomial model, you are given:

(i) Each period is one year.

(ii) The current price for a non-dividend-paying stock is 20.

(iii) u = 1.2840, where u is one plus the rate of capital gain on the stock per period if the stock price goes up.

(iv) d = 0.8607, where d is one plus the rate of capital loss on the stock per period if the stock price goes down.

(v) The continuously compounded risk-free interest rate is 5%.

Calculate the price of an American call option on the stock with a strike price of 22.

mark value = 5