Let S=$300, K=$300, r=10% risk-free interest rate, (continuously compounding), T=3 years, n=3, three-period binomial tree, \delta=6.5%, continuous dividend yield on the stock, u=1.25, and d=0.7.
a) Construct the binomial tree for the stock
b) Compute the prices of American and European calls.
c) Compute the prices of American and European puts by using risk-neutral approach.