Question 3 {Binomial Option Pricing Model] {25 Marks] An American put futures option has a strike price of $0.55 and a time to maturity of 1 year. The current futures price is $11.51}. The volatility of the futures price is 25% and the interest rate [with continuous compounding} is 5% per annum. Use a four step tree to value the option. Question 4 [Black-ScholesMerton Model} [15 Marks] Consider an option on a non-dividendpaying stock when the stock price is $19. the exercise price is $20. the riskfree interest rate is 1.5% per annum {continuous compounding}. the volatility is 20% per annum, and the time to maturity is one year. a] What is the price of the option if it is a European call? b} What is the price if it is a European put {hint: use putcall parity}? c] Is there another way to calculate the put price? Explain. cl} Explain the concept and the assumptions underlying the Black-Scholes-Merton Pricing formula