Question: Consider a two-period binomial option pricing model (=1 and =2). The initial stock price is $100 per share. Assume =1.2,=0.9, and the interest rate =3%.There

Consider a two-period binomial option pricing model (=1 and =2). The initial stock price is $100 per share. Assume =1.2,=0.9, and the interest rate =3%.There is a 2-year European call option with a strike price of $105.a) Clearly draw the binomial tree for this position. Indicate the stock price at each node, and the payoffs of the call option at the terminal nodes.b) Calculate the risk-neutral probability q.c) Calculate the price of this call option.

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