should be answered by building ann =

n=10-period binomial model for the short-rate,r_{i,j}

ri,j

. The lattice parameters are:r_{0,0} = 5\%

r0,0

=5%,u = 1.1

u=1.1,d = 0.9

d=0.9andq =1-q = 1/2

q=1q=1/2.

zero-coupon bond (ZCB) that matures at timet = 10

t=10and that has face value 100.

Compute the price of an American call option on the same ZCB of the previous three questions. The option has expirationt = 6

t=6and strike= 80

=80.

Submission Guideline:Give your answer rounded to 2 decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24.