Solve Q2

a) Consider a 3-period binomial model of asset pricing with P(H) = 2/3. Let the initial stock price be So = 6 per share, u = 2 be up factor, d = 0.5 be down factor. Then compute the following conditional expectations i) E2[S3], lii) E2[S2), 2[S3/S2], ) E2[S2S3].