Question: You should build a 15-period binomial model whose parameters are calibrated to a Black-Scholes geometric Brownian motion model with: T=0.25T=0.25 years, S0=100S0=100, r=2%r=2%, =30%=30% and

You should build a 15-period binomial model whose parameters are calibrated to a Black-Scholes geometric Brownian motion model with: T=0.25T=0.25 years, S0=100S0=100, r=2%r=2%, =30%=30% and a dividend yield of c=1%c=1%. Your binomial model should use a value of u=1.0395...u=1.0395.... (This has been rounded to four decimal places but you should not do any rounding in your spreadsheet calculations.) Compute the price of an American call option with strike K=110K=110 and maturity T=.25T=.25 years. Round all your answers to 2 decimal places. So if you compute a price of 12.9876 you should submit an answer of 12.99. Compute the fair value of an American call option with strike K=110K=110 and maturity n=10n=10 periods where the option is written on a futures contract that expires after 15 periods. The futures contract is on the same underlying security of the previous questions. Round all your answers to 2 decimal places. So if you compute a price of 12.9876 you should submit an answer of 12.99

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