Question: Consider a three-period binomial model for a stock with the following parameters u=1.2, d=0.9 and So=60. Assume that the discretely compounded risk-free rate of the

Consider a three-period binomial model for a stock with the following parameters u=1.2, d=0.9 and So=60. Assume that the discretely compounded risk-free rate of the interest is r = 11% per period. i. Verify that there is no arbitrage in the market and construct the binomial tree. ii. Calculate the price of a standard European Call option with maturity date in three periods and strike price K=60

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