Assuming a security has a maturity of one year and at maturity, the security pays an amount in dollars equal to

Here, 1 and 0 are, respectively, the share price one year from now and the share price today. Assume that the risk-free interest rate is zero per cent and that the company pays no dividends. Assume that the share price, in dollars, today is = 1. Assume the absence of arbitrage throughout and assume that there are no transactions costs.

If the volatility of the company's shares is 1%, using a three-step binomial tree, what is the price today of this security?

(S1)2 (50) (S02