You are given the following information: Current stock price is 50 (stock pays no dividend) Annual stock volatility is 35% Risk-free rate (r):4% Beta:0.75 Market risk premium: 8% Continuous compounding You purchased an European call option on this stock with a strike price of 55 (K). The option matures in two years and there two periods in total. Use the binominal tree pricing model to value this option by answering the following questions. Estimate the up rate of the stock (u), down rate of the stock (d) and risk neutral probability (p). Express your answers as a fraction and round to 4.d.p. Up Rate of the Stock Is Down Rate of the stock is Probability is To estimate the option premium, complete the following binomal tree. Round your answers to 4.d.p. T=0 Price 1 = Payoff 1 0 = First step Price 2 = Payoff 2= Price 3 Payoff 3= 1 Second step Price 4 = Payoff 4= Price 5 = Payoff 5= Price 6= Payoff 6= 2