Question: Using the two-step binomial option pricing model calculate the price for a 1 year American call option for a stock trading at $61.89 today, under

Using the two-step binomial option pricing model calculate the price for a 1 year American call option for a stock trading at $61.89 today, under the following market conditions:

The continuously compounded risk free rate is 2.4693%pa

The number of periods is 2, each of 0.5 year

The strike price is $60

The volatility of the stock is 40.25%pa

The stock pays a dividend of $0.75 at the end of the first 6 months

The stock pays a dividend of $0.78 at the end of the second 6 months.

Also calculate the following:

* Option price:

* Delta

* Probability up

* Probability down

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