Consider a European call option on a non-dividend paying stock witere the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility is 30% per annum, and the time to maturity is 6 month

(a) Calculate

a, d, and p for a two-step tr

(b) Value the option using a two-step tree.

(e) Verify that DerivaGen gives the same wer

(d) Use DerivaGen to value the option with 5, 50, 100, and 500 time steps. 11:21. Repeat Problem 11.20 for an American put option on a futures contract. The strike price and the futures peice are $50, the risk-free rate is 10%, the time to maturity is 6 months, and the volatility is 40% per