Question: (7) Consider a three-period binomial tree for a stock price, where the spot price is $100, the probability of stock price going up in any

(7) Consider a three-period binomial tree for a stock price, where the spot price is $100, the probability of stock price going up in any time period is 0.6, and where u-1.25 and d- 0.8. Assume zero interest rates and dividends. (i) (3 points) Find the time-zero value of an ATM European call option that expires at the end of three periods. (ii) (4 points) Suppose the stock price follows the following path: 100,125,100,125. Describe the replicating portfolio and all the adjustments until the expiry. (iii) (3 points) Find the time-zero value of an ATM American put option that expires at the end of three periods

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