Question 7 0 / 1 pts As usual, you begin your day at work. You are using a two-step binomial tree to estimate the price of a call option on WEN. The strike price of the call option is $22. The price of WEN today is $46. The risk-free rate is 5%. Round your solution to the nearest three decimals (i.e. 2.312) when needed. Please do not type the $ symbol. u=2 Hints: Step 1. Get the stock prices for WEN at each node using "u" and "d". WEN price at node B = price today * u WEN price at node D = price today * u * u WEN price at node E = price today * u * d WEN price at node C = price today * d WEN price at node F = price today * d * d Step 2. Get the intrinsic value of the call option at the ending nodes (D, E and F). The formula is MAX(StockPrice-Strike,0). *At each node, use the stock prices of WEN calculated above. *Remember the strike price is given and it is always the same. Step 3. Get the value of the probabilities p = ((1+Riskfree) - d) / (u-d) ===> Values of "u" and "d" are given above. Value of Riskfree = 0.05, hence .............. p = (1.05 - d) / (u - d) *(1 - p) = Simply 1 - value of p which you calculate Step 4. Get the value of the call at node B: Step 4. Get the value of the call at node B: (p*callnodeD + (1-p)*callnodeE) / 1.05 *call is the intrinsic value of the call you calculate at each node. Step 5. Get the value of the call at node C: (p*callnodeE + (1-p)*callnodeF) / 1.05 *call is the intrinsic value of the call you calculate at each node. Step 6. Get the value of the call at node A (today): (p*callnodeB + (1-p)*callnodec) / 1.05 *call is the intrinsic value of the call you calculate at each node. ed ver 26.05 margin of error +/- 2%