(Unless otherwise stated, assume that no dividends are paid on stocks.) 1. Stock ABC is worth $100 now. In each semiannual period, it either grows by a factor of 1.1, or by a factor of 0.8, and suppose that the stock prices are monotone within each period. Further, suppose that r = 0.03 is the continuously compounded risk free rate. Consider an option on the marimum price which, in one year, pays the largest value the stock attained throughout that period (including its price now)! Calculate the risk neutral price of the option now. (Hint 1: binomial tree.) (Hint 2: is this a path dependent option?) (a) 104.33 (b) 105.57 (C) 109.49 (d) 111.15 (e) 112.24 1 So for example, if the price begins at 100, drops to 80, then to 64, the option would pay So = 100 at expiration, since that was the maximum price it attained over its lifespan *No rush in answering the question, take your time, but please make sure it is correct. appreciate your help in advance & I will be sure to leave a thumb up