3. Calculate the price of the first Citigroup trade in Exhibit 5.

a. Use a Binomial tree with 3 steps (1 step = 1 year). Assume cash dividends of $0.18 are paid at the end of the first and second year. Suppose the annualized volatility is 39.2%.

b. Use the Black-Scholes model with a volatility of 39.2% and a dividend yield of 2.6%.