3) Use a 3 period binomial tree to price an European at-the-money put with three months to maturity on stock whose price today is $70 and whose annual volatility is 9%. The risk free interest rate is equal to 8% (continuously compounded). Compare Note: We assume that u = explovt) and d=1/4, where o is the annualized volatility and tis the time of a period (t=1/12 in this example). This implies: u=1.03, d=0.97 Further note that in the case of continuous compounding the formula for risk-neutral e" - de probabilities changes to q = 0.62 u-d 1.03 -0.97 0.08(1/12) - 0.97