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  3. 3. consider a one-step binomial tree used to price

3. Consider a one-step binomial tree used to price a European call option on a...

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3. Consider a one-step binomial tree used to price a European call option on a non-dividend paying stock with a current spot price of $50 per share. The call has 3 months to expiry and a strike price of $52 per share. During the call's lifetime, the stock price is expected to move up or down by 10%. The continuously compounded risk-free rate is 5% per annum. Finally, in the real world, the stock's expected contin uously compounded return is 10% per annum. a)(5 points) Calculate the current option price. b (5 points) Calculate the stocks real-world probability of an upwards-movement cpoints) Calculate the option's real-world expected continuously compounded return

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