Consider a one year American call option to buy stock at $50. Assume annual effective interest rate is 5%.

1. At each node, calculate replicating portfolio (that mean calculate and B)

2. Calculate call option value at time zero

3. If option style is European instead of American, what would be the price of the option?

4. If option is an American put option, instead of call option what would be the price of the option

5. If option is an European put option

Problem 1.1. Consider follouring tuo step binomial tree for stock price movement for a year. Each step is 6-month so 60 55 50 35 Problem 1.1. Consider follouring tuo step binomial tree for stock price movement for a year. Each step is 6-month so 60 55 50 35