Question: Suppose that stock price will increase 10% and decrease 10% every year. The stock does not pay dividend and curretly is tradding at S $30.

Suppose that stock price will increase 10% and decrease 10% every year. The stock does not pay dividend and curretly is tradding at S $30. Annual risk-free rate is rf-5%. a. [3pts] Construct a two-year binomial tree for the value of the stock. b. 3pts Calculate the value of a European call option on the stock with an exercise price of $31 c. [3pts] Calculate the value of a European put option on the stock with an exercise price d. 1pt Confirm that your solutions for the values of the call and the put satisfy put-call e. [5pts] [Extra credit and not required] Calculate the value of an American put option on of $31 parity. the stock with an exercise price of $31

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