Questionshould be answered by building a 15-period binomial model whose parameters should be calibrated to a Black-Scholes geometric Brownian motion model with:

T = .25

S0 =100,

r=2%,

=30%

and a dividend yield ofc=1%.

Hint

Your binomial model should use a value ofu = 1.0395...

u=1.0395.... (This has been rounded to four decimal places but you should not do any rounding in your spreadsheet calculations.)

Submission Guidelines

Round all your answers to 2 decimal places. So if you compute a price of 12.9876 you should submit an answer of 12.99.

Compute the fair value of an American call option with strikeK = 110

K=110and maturity

n = 10

n=10periods where the option is written on a futures contract that expires after

15 periods. The futures contract is on the same underlying security of the previous

questions.