2. A non-dividend paying stock is trading at $78. Its annualized volatility is 30%. The continuously compounded interest rate is 3% for all maturities. a) (2.5 points) What is the value of a 4-month European call option with a strike price of $80 given by a 2-period binomial tree? (Hint: Compute , and ; construct the 2- period binomial tree for stock; determine the option payoff on expiration date; compute option value at earlier dates using the risk-neutral pricing formula.) b) (2.5 points) What is the value of a 4-month European put option with a strike price of $80 given by a 2-period binomial tree? c) (2 points) What is the value of a 4-month American put option with a strike price of $80 given by a 2-period binomial tree? (Hint: Be careful with the early exercise decisions. Compare the value of holding on to the option and the payoff from early exercise.)