Consider a non-dividend paying stock with a current value of 100 kr that is described by the 2-step Binomial model depicted below. Assume that the continuously compounded risk free interest rate is 10% per annum for all maturities. Consider a European derivative on this stock that when it matures, in 8 months, pays out the minimum of the stock price and a strike price of 90 kr, that is min(ST, K).

a) Calculate the risk neutral probability that the stock price increase over 4 months from 100 kr to 125 kr. (Keep at least 4 decimals in all your calculations.)

b) Calculate the value of the derivative today. (Keep at least 4 decimals in all your calculations.)