Problem 2 (12 points): Consider a 1-year European call option with strike price of $4900 on a stock index if the current index value is $5000. The dividends paid by the stock included in the index can be approximated by a continuously compounded dividend yield of 5%. The risk-free interest rate is 9%. The standard deviation of the index price appreciation is o=20%. When needed, use Cox-Ross-Rubenstein method for determining u and d (see Ch 13 Power Point slides) a) (4 points) Find the value of this option using 2-step binomial option pricing model. b) (4 points) Find the value of this option using 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 2 (12 points): Consider a 1-year European call option with strike price of $4900 on a stock index if the current index value is $5000. The dividends paid by the stock included in the index can be approximated by a continuously compounded dividend yield of 5%. The risk-free interest rate is 9%. The standard deviation of the index price appreciation is o=20%. When needed, use Cox-Ross-Rubenstein method for determining u and d (see Ch 13 Power Point slides) a) (4 points) Find the value of this option using 2-step binomial option pricing model. b) (4 points) Find the value of this option using 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