6 Binomial Model II (15 points) Consider a three-period binomial model with t = 0,1,2,3. To make life easy, At = 1. To make life even easier, suppose that at every point in time, the risk-free zero rate between periods is 2% per annum with continuous compounding. The underlying stock starts at price So = $100, and between every two consecutive periods, the stock either goes up by 25% or falls by 20%, each of which happens with probability 50%. Find the price of an American put option with strike price K = $105.