Question: 2. (60) Consider applying the binomial method to price American options. Suppose that stock in the MAGA Hat Company is priced at So =

2. (60) Consider applying the binomial method to price American options. Suppose that stock in the MAGA Hat Company is priced at So = 100 and consider options that are at the money K = 100. The options mature in T = 1 year, which we divide into n = 3 periods, each of length At = 1 = 113. The risk-free rate is r = 0.08 and MAGA stock has a volatility of = 0.45. (e) (10) Find the price of American call and put options. Is it ever worthwhile to exercise early? (f) (10) Does put-call parity hold for American options?

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