Draw the binomial tree for the call option and find the, Financial Management

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Draw the binomial tree for the call option and find the

Suppose that Stock XYZ is currently trading at $50 and does not pay any dividends. Using a binomial tree with two periods, we would like to price of an American call option with a strike price of $52 and a maturity of six months. Assume that annual continuously compounded interest rate is 5% and the volatility of the stock is 20% per year.

a. Find the binomial tree parameters u,d,p and (1 − p).

b. Draw the binomial tree for the stock price.

c. Draw the binomial tree for the call option and find the value of the call option.

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Financial Management: Draw the binomial tree for the call option and find the

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