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Option Valuation- American Put Option using Binomial Tree

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A stock price is currently $50. Over each of the next two 3-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 5% per annum with continuous compounding. What is the value of a 6-month American put option with a strike price of $51?

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Solution Summary

Values an American put option using binomial tree are provided in the solution.

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