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Suppose Carol's stock price is currently $20. If the standard deviation of the continuously compounded returns () on a stock is 60 percent per year.

Suppose Carol's stock price is currently $20. If the standard deviation of the continuously compounded returns () on a stock is 60 percent per year. The annual risk-free rate is 12%, compounded every 6 months.

A. Using one-step binomial tree, what is the current value of a six-month call option with an exercise price of $25?

B. Using two-step binomial tree, what is the current value of a one-year put option with an exercise price of $25?

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