Question: Consider applying the binomial method to price American options. Suppose that stock in the MAGA Hat Company is priced at S0 = 100 and consider

Consider applying the binomial method to price American options. Suppose that stock in the MAGA Hat Company is priced at S0 = 100 and consider options that are at the money K = 100. The options mature in T = 1 year, which we divide into n = 3 periods, each of length t = T n = 1 3 . The risk-free rate is r = 0.08 and MAGA stock has a volatility of = 0.45. (a) (10) Calculate the magnitude of upticks u and downticks d, as well as the risk-neutral probability p.

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