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Consider a stock paying no dividends. Price movements follow the binomial model with the following...

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Finance

Consider a stock paying no dividends. Price movements follow the binomial model with the following tree.

Price State 0, 100

State u, 140.0

State d, 51.0

State uu, 196.0

State ud, 71.4

State du, 71.4

State dd, 26.01

Interest rate is 5% per period. T

he goal of this problem is to find the time-0 price of the following insurance-asset. It pays you $90 every time the stock price goes down, and nothing otherwise. The payments can happen in Year 1 and Year 2. In this problem, please round your answers to at least FOUR digits.

please answer all parts of question

a) Find the time-0 price of the state-contingent claim paying $1 at time t=1 in the node (S1=51, t=1), and nothing otherwise.

b) The market is now in the second period (t=1), and the stock price is equal to 51.0 . Find the current, time-1 price of the state-contingent claim paying $1 at time t=2 in the node (S2=26.01, t=2), and nothing otherwise.

c) Find the time-0 price of the state-contingent claim paying $1 at time t=2 in the node (S2=26.01,t=2 ), and nothing otherwise.

d) Find the time-0 price of the asset described above.

please show me how to do this.

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