Please solve questions using Excel
Homework 6 Q1. Explain why one can't use Derivagem software to solve Q12.5 in page 293. Q2. A stock price is currently $100. Over each of the next three sixmonth periods, it is expected to go up by 10% or down by 10%. The riskfree interest rate is 8% per annum. Calculate p, the riskneutral probability that the stock price will go up next period. Hint: End of chapter 12, Q5 For Q3 and Q4, use the following information. A nondividend paying stock is currently trading at $100 and its volatility is 35%. Consider a put option on this stock, with a strike price of $90, expiring in 6 months. The current riskfree rate is 5% per annum. We will price the put option with a 3step binomial tree (the number of steps = 3). Q3. First, calculate the European put option price in a spreadsheet. Then use Derivagem to price it. Confirm these 2 prices match. Q4. Calculate the American put option price in a spreadsheet. Then use Derivagem to price it and confirm. 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