You use the following information to construct a one-period binomial forward tree for modeling the price movements

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You use the following information to construct a one-period binomial forward tree for modeling the price movements of a nondividend-paying stock. (The tree is sometimes called a forward tree.)

(i) The period is 3 months.

(ii) The initial stock price is $100.

(iii) The stock’s volatility is 30%.

(iv) The continuously compounded risk-free interest rate is 4%.

At the beginning of the period, an investor owns an American put option on the stock.

The option expires at the end of the period.

Determine the smallest integer-valued strike price for which an investor will exercise the put option at the beginning of the period.

(A) 114

(B) 115

(C) 116

(D) 117

(E) 118

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