Question: Suppose the stock discussed in the previous exercise pays dividends. Assume all parameters are the same. Consider three forms of dividends paid by the firm:
a. The stock pays a continuous, known stream of dividends at a rate of 4% per time.
b. The stock pays 5% of the value of the stock at the third node. No other dividends are paid.
c. The stock pays a $5 dividend at the third node. In each case, determine the tree for the ex-dividend stock price. For the first two cases, determine the premium of the call. In what way(s) will the third type of dividend payment complicate the binomial tree?