Question 2 Consider a stock that pays dividends and whose current price is $40. The binomial tree below describes the possible stock prices over the next 3 years. Assume that the riskfree rate is 2% and the length of each period is 1 year. 3'21] It'll} 8f] {ill / 40 1-0 \\ 20 2D /\\/\\ /\\/\\/\\ Ill 5 (A)What is the volatility of the underlying asset? Calculate your answer in percent and answer it to four decimal places. (4 Marks) (B) What is the dividend yield of the underlying asset? Calculate your answer in percent and answer it to four decimal places. (4 Marks) (C)What is the riskneutral probability of the stock price going up? Answer it to four decimal places. (2 Marks) (D) Consider a European lookback put option on the stock with maturity 3 years. The payoff at maturity of the option is equal to max(.S' 3* S 3 , 0) where SE is the stock price in year t and S; = is the maximum stock price reached during the life of the option. For example, if the stock price follows a path, 50 = 340 , S1 = $20 , 5'2 = $10, and 5'3 = 320 , the maximum stock price is $40 and the option payoff is 40 20:320. Find the value of the European lookback put option and answer it to four decimal places. (8 Marks) (E) Now, consider an American lookback put option on the stock with maturity 3 years. If exercised at any time prior to the maturity, the payoff is equal to where S; is the maximum stock price that occurred between time 0 and year E. Find the value of the American lookback put option and answer it to four decimal places