a) Using a Binomial pricing model with 1-month steps, find the price of a 3-month American Call and a 3-month American Put option with the following details:

b) According to the Binomial model in part a), is it optimal to exercise either of the options early? If so, when?

c) Using the Call Options Binomial Model:

(i) Create a graph of the American Call Options price for ST between$60 and$100

(ii) Add the Call Options payoff (intrinsic value) to the graph in part a)

(iii) Compute the options delta when the option is at the money,$15 in the money, and$15 out of the money.

d) Illustrate why doubling the stocks volatility more than doubles the price of the Put Option.

So 81 Strike Price 80 %Change Up/Down (per month) 5% APR (semi-annual Compounding) 2.0% So 81 Strike Price 80 %Change Up/Down (per month) 5% APR (semi-annual Compounding) 2.0%