Q7The current price of a nondividend-paying biotech stock is $140 with a volatility of 25%. The risk-free rate is 4%. Must show work to get credit.

1. Use a twoperiod tree model where each period is sixmonths, to indicate u, d, the stock price at each node, and the riskneutral probabilities. (10 pts.)

2. Use a two step tree to value a sixmonth European put option. The strike price is $150. (10 pts.)