The current price of a stock is $55. Calculate the value of an American put option on
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Question:
The current price of a stock is $55. Calculate the value of an American put option on the stock using a two-step binomial tree given the following information. The strike price of the option, K = $57, each time step is one year, the risk-free interest rate, r = 5%, u =1.25, d = 0.8, and p = 0.628
Part 2.
Given that u= e^(σ√∆T), calculate the implied volatility for the American put option in Part 1.
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham
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