For the next 5 questions, use the following information:

A stock has a current price of $150, an annual volatility of returns of 10%, and pays no dividends. The risk-free rate is 10%. Consider a 6-month European call option on this stock with a strike price of $120 and a 2-period binomial options pricing model where u and d are calculated as in class.

1. What is the payoff of the option if the stock price goes up twice?

2. What is the payoff of the option if the stock price goes up then down?

3. What is the payoff of the option if the stock price goes down twice?

4. What must be the of this option at all nodes in the Binomial tree?