Problem BIN-318B LR1711 We are given a three-period binomial tree for the price of a non-dividend-paying stock. With our usual notation,

Problem BIN-318B LR1711 We are given a three-period binomial tree for the price of a non-dividend-paying stock. With our usual notation, S(0) = $50 U = 1.02 The risk-neutralized probability: R = 1.0125 d = 0.96 It = . . . . . . . ..... The tree for S: 53.060 62.020 51.000 49.939 50.000 48.960 48.000 47.002 46.080 44.237 t = 0 t = 1 t = 2 t = 3 Complete the following binomial trees. a) A security which pays [S(3)]2 in cash. 1,956.89 (b) A share-or-nothing call which expires at time 3, with strike K = 48 53.060 (c ) A security which pays max{1/2S(2) + 1/2S(3) - K,0} at time 3, where K = 48 uuu (This is a call on the average of the last two prices.) 2.980 uud udu udd duu dud ddu ddd