(21) (European Binomial Tree) The current stock price is $ 31. A Call Option has a Strike Price of $ 30. The annual interest rate is 4%. The Company pays NO dividend. The Option expires in 0.4 years. A Binomial Tree has 3 dates (0, 1, 2) with only 2 time steps, and therefore 3 ending points. The stock tree UP factor U= 1.1, and D=.9 , and the UP-Probability = .54. { NOTE NO Need to Compute them}

(a) Compute delta-t , the PV factor, and the a factor.

(b) Draw / label / compute the Stock Price tree for this problem.

(c) Draw/ label/ compute the Call Price tree for this problem (either separately, or on the Stock tree)

(d) CLEARLY indicate what the option price should be NOW , at date 0.