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Suppose you are attempting to value a 1-year expiration option on a stock with volatility...

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Suppose you are attempting to value a 1-year expiration option on a stock with volatility (.e., annualized standard deviation) of o = 0.33. a. I period of 1 year. b. 4 subperiods, each 3 months. c. 12 subperiods, each 1 month. What would be the appropriate values for u and d if your binomial model is set up using: (Do not round intermediate calculations. Round your answers to 4 decimal places.) u = explov At) 1.3910 d = exp(-ov At) 0.7189 Subperiods At = T 1 1/1 = 1 4 1/4 = 0.25 121/12 = 0.0833 b. c

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