1. A stock price is currently $30. During each two-month period for the next four months it is expected to increase by 8% or decrease by 10%. No dividend payment is expected during these two periods. The risk-free interest rate is 5% per annum. Use a two-step tree to calculate the value of a European-style derivative that pays off [max(30-ST,0)]^2, where STis the stock price in four months? (hint: please note that this is not a typical put option, since the final payoff is the square of the normal put option payoff.)