For a non-dividend paying company. The current spot price of the companys equity is $50 per share. The value of the stock will be at least $100 in 12 months.

S₀ = $50

T = 12 months

r = 30 basis points per month

u=1.1 per month

d = 1/u= 1.1^-1 per month

1. Apply the binomial tree model to value a 12-month European style call with a strike of $100. What is the call premium?
2. Use put-call parity to value the put on the same asset, for the same expiration, and with the same strike. What is the put premium?
3. The investor is considering two other calls. One with a strike of $200. Another with a strike of $0. What is the premium on the call with a strike of $200? Why? What is the premium on the call with the strike of $0? Why?