Suppose S0= 4,u= 2,d=1/2 and r=1/4. Let N= 2. Consider an European call option with strike price K= 5. Use the backward algorithm in Theorem 4.4.3 to evaluate v0,v1,v2 (can ignore the comparing part)

3. (20 points) Suppose So = 4, u = 2, d = and r = . Let N = 2. Consider an European call option with strike price K = 5. Evaluate V, V1, V2. Comparing with the previous question, what do you see? 3. (20 points) Suppose So = 4, u = 2, d = and r = . Let N = 2. Consider an European call option with strike price K = 5. Evaluate V, V1, V2. Comparing with the previous question, what do you see