Question 9 (10 points) The figure below shows the binomial tree. The numbers show the stock prices at the node. Suppose that the tree in Figure is used to value an Asian call option that pays off mar(Save 300,0), where Save is the average stock price during the 4 months (with the first and last stock price being included in the average). Every time a simulation is run, we have one path. We run eight simulations and the path from each simulation is listed in the Table below. Please keep two decimal places for all your answers. Please write down the steps for all sub-questions. 389.00 356.73 327.14 327.14 300.00 300.00 275.11 275.11 252.29 231.36 Figure 1: Binomial Tree with Stock Prices (a) Fill out the table with the average stock price and option payoff for each simulation. (4 points) Trial Path Average Stock Price Option Payoff 1 UDU (1) (2) DUU (3) DDU (5) (6) 4 DUD (7) (8) 2 3 (b) What is the average option payoff? (3 points) (c) What is the option value? Assuming the risk-free rate is 8%. (3 points)