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A stock currently priced at $75 is expected go up by 20% or down by 10% per year over the next 3 years. Your broker
A stock currently priced at $75 is expected go up by 20% or down by 10% per year over the next 3 years. Your broker offers you an American call option written on the stock with a strike price of $50 and a maturity of 3 years. However, the option comes with a non-standard feature. Namely, the payoff at any point in time cannot exceed $40. Assuming the continuously compounded risk free rate of 8% p.a., use a 3-step binomial tree to price the option. Round to 4 decimal digits at each step
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