Question: 6. The stock price has the following binary tree structure: 2 12 10 The probability of two possible outcomes is equal, and the risk-free interest

6. The stock price has the following binary tree structure: 2

6. The stock price has the following binary tree structure: 2 12 10 The probability of two possible outcomes is equal, and the risk-free interest rate is 10%. (a) There is a put option on this stock with a strike price of 9. Calculate the option price. (b) Suppose you get a good news: the probability of the stock price rising to 12 is greater than 1/2, while the stock price is still 10. Is the price of the put option you are willing to pay up or down? Explain the reason

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