Question: Consider a stock with current price S=100 and standard deviation of annual returns =20%. Stock does not pay any dividends. Consider a 1-year European put

Consider a stock with current price S=100 and standard deviation of annual returns =20%. Stock does not pay any dividends. Consider a 1-year European put option on this stock with strike price of $102. The risk-free interest rate is 9%. When needed, use Cox-Ross-Rubenstein method for determining u and d.

a) (3 points) Find the value of this option using 2-step binomial option pricing model.

b) (3 points) Find the value of this option using 10-step binomial option pricing model.

c) (3 points) Find the value of this option using 20-step binomial option pricing model

d) (3 points) Using Excel or any other methods (except option price calculators), find the value of this option using Black-Scholes model.

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