Question: Calculate the American call price using the two-period binomial model. The current stock price is 50 and the exercise price is 55. The option expires

  1. Calculate the American call price using the two-period binomial model. The current stock price is 50 and the exercise price is 55. The option expires in 25 days and volatility is 75%. Would the European call have a different price? If so, would it be higher or lower? Using the information from the problem show how to create a riskless portfolio. Proves that it is riskless after 1 period. (You do not have to draw the stock price path and the call price path but clearly show the answer for each part) Round to 4 decimals

The adjusted risk-free rate is .0017

u = 1.1489

d = .8704

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