For this question, I suggest that you copy tab 10.20 in the lectures_03_04.xlsx file on the course site into a new Excel file. You may, of course, use any other tool if you so desire. Set the parameters of the 3-period (forward) binomial tree to s = 100, K = 95, r = 0.05, T = 3, 0 = 0.3, and 8 = 0.03. First consider a European put option with those characteristics. In a second copy of this Excel tab (or other tool), consider the American put option with the same characteristics. (a) Comparing both 3-period trees, draw the 3-period tree that describes the evolution of the value of a (b) portfolio II which is long one unit of the American put and short one unit of the European put. What does this portfolio represent? -rh e After a single down move (i.e. when Sn = d So), does the following equation: IT= E="" E [p*Tidu + (1 p*)Irdd], describe the value of the portfolio? (Note that Ild is the value of the portfolio when Sn = d So, and II die and Idd are the two possible values of II, at 1 = 2h.) What is the rationale? For this question, I suggest that you copy tab 10.20 in the lectures_03_04.xlsx file on the course site into a new Excel file. You may, of course, use any other tool if you so desire. Set the parameters of the 3-period (forward) binomial tree to s = 100, K = 95, r = 0.05, T = 3, 0 = 0.3, and 8 = 0.03. First consider a European put option with those characteristics. In a second copy of this Excel tab (or other tool), consider the American put option with the same characteristics. (a) Comparing both 3-period trees, draw the 3-period tree that describes the evolution of the value of a (b) portfolio II which is long one unit of the American put and short one unit of the European put. What does this portfolio represent? -rh e After a single down move (i.e. when Sn = d So), does the following equation: IT= E="" E [p*Tidu + (1 p*)Irdd], describe the value of the portfolio? (Note that Ild is the value of the portfolio when Sn = d So, and II die and Idd are the two possible values of II, at 1 = 2h.) What is the rationale