Using the binomial pricing model for a two-period call option with the following terms:

Current price of underlying asset $110

Exercise price of option $95

Per period risk-free rate 3%

Report your answers to the precision of three digits past the decimal point. Assume the price of the underlying asset moves either up or down by 6% each period. What is the current value of the call option? Map out the alternative prices and corresponding call option values at the three points in time [start of period 1, start of period 2 (end of period 1), and end of period 2].

Recalculate the value of the call option when the underlying asset's price moves up or down by 5% over each period. Explain any (or no) difference in the call option price between the two cases: how do the option prices compare two periods prior to expiration and one period prior to expiration? If the prices are the same, why are they the same? If they are different, how and why are they different?