Question: Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, = 30%, and = 5%. Explicitly construct an

Suppose S = $100, K = $95, r = 8% (continuously compounded), t = 1, Ïƒ = 30%, and Î´ = 5%. Explicitly construct an eight-period binomial tree using the lognormal expressions for u and d:

Compute the prices of European and American calls and puts.

d= er-8- Soyh-ovA u = elr-8-5o)k+ova

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