Consider an n = 1 step binomial tree with T = 1. Suppose r, the annualized risk-free rate is 8 %, and delta, the annualized dividend rate is 7 %. Also suppose the annualized standard deviation of the continuously compounded stock return, sigma, is 45 %. Suppose further that the initial stock price, S = $ 90. Compute American call option prices for K = $ 45, $ 54, $ 63, $ 72 ,$ 81, $ 90, $ 99.



a) Determine the American call premium, when K = $ 45 ?



b) Determine the American call premium, when K = $ 54 ?



c) Determine the American call premium, when K = $ 63 ?



d) Determine the American call premium, when K = $ 72 ?



e) Determine the American call premium, when K = $ 81 ?



e) Determine the American call premium, when K = $ 90 ?



e) Determine the American call premium, when K = $ 99 ?