14. Consider a two-period cash-or-nothing binary option in the binomial example of Figure...

14. Consider a two-period cash-or-nothing binary option in the binomial example of Figure 1 with K = 90 and M = 10. Assume that the per-period interest rate is R= 1.02.

(a) Show that the initial value of the option is

(b) What is the value of an asset-or-nothing option in this case?

(c) What is the value of a vanilla option? Verify that the following equation holds.