Multi Step Binomial Tree: Consider again the at-the-money European call option with one year left to maturity written on a non-dividend paying stock. As in exercise 2, let todays stock price be 80 kr, the stock volatility be 30% and the risk free interest rate be 6%.

(a) Construct a one-year, five-step Binomial tree for the stock and calculate todays price of the European at-the-money call.

(b) Compare your valuation results of the European call in question 2. Are they the same? Why or why not?

(c) The option can be replicated by a portfolio consisting of the stock and a risk-free asset. What is the replicating portfolio strategy of the call?

(d) Explain how the delta should change, as the stock price increase and check if this is indeed the case in your tree

the information of Q2Consider an at-the-money European call option with one year left to maturity written on a non-dividend paying stock. Let today's stock price be 80 kr and the stock volatility be 30%. Furthermore let the risk free interest rate be 6%. Construct a one-year, two-step Binomial tree for the stock and calculate today's price of the European call.