A stock selling at $80 will either go up at the rate of u=10% or down at

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A stock selling at $80 will either go up at the rate of u=10% or down at the rate of d=-10% each month for the next two months. The constant risk-free rate is 1% per month. The stock will pay a dividend of $5 next month.

What is the price of an American PUT with a strike price of $75 and a maturity of two months?

Related Book For answer-question

Financial Accounting and Reporting a Global Perspective

ISBN: 978-1408076866

4th edition

Authors: Michel Lebas, Herve Stolowy, Yuan Ding

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Posted Date: Jul 08, 2023 05:04 AM

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A stock selling at $80 will either go up at the rate of u=10% or down at

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To calculate the price of an American put option we can use the binomial option pricing model In thi... View the full answer

Financial Accounting and Reporting a Global Perspective

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