QUESTION 3 There is a 3-month European put option on a non-dividend-paying stock with a current price $50. The strike price is $48. The current interest rate is 5%, compounded continuously. (a) Suppose that the stock price follows a single-period binomial tree model, where the stock price either goes up by 1.15 or goes down by 1/1.15. Find the option price. (b) A multi-period binomial tree model is a generalization of the single-period bino- mial tree model for option pricing. In this model, the time span from today to the maturity of the option is divided into multiple evenly-spaced periods, e.g., n periods, in each period the gross return rate of the underlying asset is assumed to take two values, e.g., u and d, and the asset price changes in different periods are independent of each other. Assume that the stock price evolves according to a three-period binomial tree, and in each period, the stock price at the end of period either goes up to 1.1 or goes down to 1/1.1 of the price at the beginning of the period. Find the option price in this model