Consider the following two-period setting. the price of a stock is $50. Interest rate per period is

Question:

Consider the following two-period setting. the price of a stock is $50. Interest rate per period is 2%. After one period the price of the stock can go up to $55 or drop to $47 and it will pay (in both cases) a of $3. If it goes up the first period, the second period it can go up to $57 or down to $48. If it goes down the first period, the second period it can go up to $48 or down to $41. Compute the price of an American put option with K = 45 that matures at the end of the second period.
Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...