Please only answer parts (b) and (c)

(b) For n=5, 10, 30, 40 periods, compute the option price using the equivalent Binomial model with n periods. (you could write a computer program or download one from the web to compute the price).

(c) Plot the error (difference of BSM formula and the one computed in part (b)) as a function of n. What can you say if n goes to infinity?

3. Consider the pricing of a three month European call option on an underlying stock whose price today is $50. The strike price is $49, the volatility is 25% per annum, the risk free rate is 4% per annum. (a) Compute the option price using the Black-Scholes-Merton formula. (b) For n=5, 10, 30, 40 periods, compute the option price using the equivalent Binomial model with n periods. (you should write a computer program or download one from the web to compute the price). (c) Plot the error (difference of BSM formula and the one computed in part (b)) as a function of n. What can you say if n goes to infinity