Question: Problem 4. You are given the following information. . The current price ofthe stock index is S = 80. . The continuously compounded interest rate

Problem 4. You are given the following information. . The current price ofthe stock index is S = 80. . The continuously compounded interest rate is r = 0.03 per year. 0 The continuous dividend yield rate is 5 = 0.02 per year. . The volatility ofthe stock index is o = 0.50 per year. 0 You will generate the binomial tree using the formulas for u and d. [u : e[r]]1+o"']1"[1f2] and d : evenamong o The options expire at time T : 0.75. 0 Your binomial tree should be built using 11 = 3 periods. 0 The constant strike price for the second option is K : 75. Compute the price ofAsian arithmetic average price call option

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