Calculate the price of the first Citigroup trade according to following data.

a. Use a Binomial tree with 3 steps (1 step = 1 year). Assume cash dividends of $0.18 are paid at the end of the first and second year. Suppose the annualized volatility is 39.2%.

b. Use the Black-Scholes model with a volatility of 39.2% and a dividend yield of 2.6%.

Citigroup trade Structure: Forward + Put

Trade date: 1/25/08

Expiration date: 1/21/11

Number of shares: 11207051

Deal Value: 100000001

Premium per share: $8.92

Citigroup shares at trade date: $26.64

Maturity: 3 years

LIA made a $100 million vestment in buying Citigroup shares