Question: Consider 3-step binomial model with one asset with initial price S(0)=100. (a) For D=0.9,U=1.1 and p=21 : (i) Determine the distribution of the price S(t)

Consider 3-step binomial model with one asset with initial price S(0)=100.

Consider 3-step binomial model with one asset with initial price S(0)=100. (a) For D=0.9,U=1.1 and p=21 : (i) Determine the distribution of the price S(t) for t=1,2,3. (ii) Compute the expected price E(S(t)) for t=1,2,3. (iii) Determine the distribution of the return K(t) for t=1,2,3. (iv) Compute the expected return E(K(t)) for t=1,2,3

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