Problem 1 (Change of Numeraire with Binomial Option Pricing Model) Consider the following binomial tree for 3 months. Consider a European call option on this stock, where the time-to-maturity is 3 months and the risk free rate is assumed to be constant at 5% per annum with continuous compounding. S :320 $0.280 S. :260 (a) Calculate the price of the 3-month at-the-money call option using one-step binomial option pricing model. (Hint: T=0.25, r=0.05, K=280.)