5. Suppose the present stock price is 100 and the stock pays no dividend. The volatility of the stock is 40% per annum. The risk-free interest rate is 12% per annum with continuous compounding. The payoff function of a one-year American option written on the stock is g(S) = (30 - In(S) 120) Use a four-step binomial tree model with equal step to find the value of the option. (a) Determine the risk-neutral probability p. (b) Determine the value of the option. [5 marks] [15 marks] 5. Suppose the present stock price is 100 and the stock pays no dividend. The volatility of the stock is 40% per annum. The risk-free interest rate is 12% per annum with continuous compounding. The payoff function of a one-year American option written on the stock is g(S) = (30 - In(S) 120) Use a four-step binomial tree model with equal step to find the value of the option. (a) Determine the risk-neutral probability p. (b) Determine the value of the option. [5 marks] [15 marks]