A European put option on a stock expires in one year. It is modeled using a 2-period binomial tree. You are given: The time t-price of the stock is S(t), S(0) = 100, The stock pays no dividend, The strike price of the put option is 150, The continuously compounded risk-free rate is 2%, The options payoff is greater than 0 at all terminal nodes of the tree. Determine the price of the option based on the binomial tree.

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Since the payoff of the option is greater than 0 at all terminal nodes of the tree the price of the ... View the full answer