Question: Consider the following binomial tree. The numbers in squares are stock prices. The numbers in circles will be option prices (# numbers are the exercise

Consider the following binomial tree. The numbers in squares are stock prices. The numbers in circles will be option prices (# numbers are the exercise numbers to answer your calculation). Today, the stock is at 100 and can go up and down over the next week, and then again up and down from there. We are pricing a call struck at 85. Use the computed q to sweep back through the tree to fill the call values in circles. For #28 - #30 use the option terms, then for nodes #28 - #30 use the recursive formula: C = q Cu + (1-q) Cd. Ignore interest.

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