The spot price is $26 and the strike price is $28 and then the risk-free interest rate is 6% per annum with continuous compounding

Over each of the next two four-month periods, the share price is expected to go up by 11% or down by 10%. Undertake the following option valuations and questions in relation

a.Use a two-step binomial tree to calculate the value of an eight-month European call option using the no-arbitrage approach.

b. Use a two-step binomial tree to calculate the value of an eight-month European put option using the no-arbitrage approach.

c.Show whether the put-call-parity holds for the European call and the European put prices you calculated in a. and b.

d. Use a two-step binomial tree to calculate the value of an eight-month European call option using risk-neutral valuation.

e.Use a two-step binomial tree to calculate the value of an eight-month European put option using risk-neutral valuation.

f.Verify whether the no-arbitrage approach and the risk-neutral valuation lead to the same results.

g.Use a two-step binomial tree to calculate the value of an eight-month American put option.

h. Calculate the deltas of the European put and the European call at the different nodes of the binomial three.