Problem 1 (12 points): Consider a stock with current price S=100 and standard deviation of annual returns =30%. Stock does not pay any dividends. Consider a 1-year European call option on this stock with strike price of $95. The risk-free interest rate is 8%. a) (3 points) Find the value of this option using Cox-Ross-Rubenstein 2-step binomial option pricing model. b) (3 points) Using Excel, find the value of this option using Cox-Ross-Rubenstein 5-step binomial option pricing model. c) (3 points) Using Excel, find the value of this option using Cox-Ross-Rubenstein 10-step binomial option pricing model. d) (3 points) Using Excel or any other methods (except option price calculators), find the value of this option using Black-Scholes model. Problem 2 (12 points): Consider a 6-month European put option with strike price of $2050 on a stock index if the current index value is $2000. The dividends paid by the stock included in the index can be approximated by a continuously compounded dividend yield of 10%. The risk-free interest rate is 8%. The standard deviation of the index price appreciation is =30%. a) (4 points) Find the value of this option using Cox-Ross-Rubenstein 2-step binomial option pricing model. b) (4 points) Using Excel, find the value of this option using Cox-Ross-Rubenstein 10-step binomial option pricing model. c) (4 points) Using Excel or any other methods (except option price calculators), find the value of this option using Black-Scholes model Problem 3 (6 points): A 7-month forward price on a stock is $100. The price of a 3-months European call option with strike price of $98 on this forward contract is $5. Using Black's model, find the price of a 4- months European put option with strike price of $101 on the same forward contract if the risk- free interest rate is 8%. You may want to use Excel for this question.