(i) (25 points) In the single-period binomial setting, assume that a stock holder who purchases 1 unit of the stock at time 0 receives a dividend payment of 100q% of whatever the stock price is at the end of the time period. How should a derivative on this stock be priced? Explain why the no-arbitrage price is given by (following the notations in the lecture notes of Week 2-3): 1 RQ-1- - d R=1+r, Q = 1+q. R u - d (ii) (25 points) In the multiple-period binomial setting, we again assume that one who enters a long position of 1 unit of the stock at the beginning of any time period receives a dividend payment of 100% of whatever the stock price is at the end of the time period. How should a derivative on this stock be priced? The algorithm and reasoning - based on a dynamic hedging strategy are very much similar to the case of q = 0. Please spell out the details. Use your best logical thinking and writing. ElbCu + (1 - p)Ca], where (i) (25 points) In the single-period binomial setting, assume that a stock holder who purchases 1 unit of the stock at time 0 receives a dividend payment of 100q% of whatever the stock price is at the end of the time period. How should a derivative on this stock be priced? Explain why the no-arbitrage price is given by (following the notations in the lecture notes of Week 2-3): 1 RQ-1- - d R=1+r, Q = 1+q. R u - d (ii) (25 points) In the multiple-period binomial setting, we again assume that one who enters a long position of 1 unit of the stock at the beginning of any time period receives a dividend payment of 100% of whatever the stock price is at the end of the time period. How should a derivative on this stock be priced? The algorithm and reasoning - based on a dynamic hedging strategy are very much similar to the case of q = 0. Please spell out the details. Use your best logical thinking and writing. ElbCu + (1 - p)Ca], where