Construct binomial tree showing the possible stock

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Reference no: EM132010493

Assume the following parameter values: S=100, u=2, d=.5, R=1.25. Construct a binomial tree showing the possible stock price movements over two periods. Use the tree to compute the fair values for:

a. a two-period 100 strike call option;

b. a two-period 100 strike European put option.

Reference no: EM132010493

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