Question: Consider a one-step binomial tree on the stock with a current price of $70 that can go either up to $90 or down to $50

Consider a one-step binomial tree on the stock with a current price of $70 that can go either up to $90 or down to $50 in 1 year. The stock does not pay dividends and interest rates are zero. We want to price the 1-year $60-strike European put option on this tree.

(i) What's the put option payoff 1 year later if the stock price ends up at $90? (integer)

(ii) What's the payoff if the stock price ends at $50? (integer)

(iii) Use the tree to compute the value (integer) and delta (2 decimals) of the put option.

(iv) What's the risk-neutral probability of the stock price going up to the $90 mode of the tree?

(2 decimals) (Write all answers in the exact required decimals.)

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