Question: Consider a three-period binomial model (t = {0; 1; 2; 3}), with a risky non-dividend paying stock, Prudential, which is currently trading for 1,350. In

Consider a three-period binomial model (t = {0; 1; 2; 3}), with a risky non-dividend paying stock, Prudential, which is currently trading for 1,350. In each period the stock can go up by 30% or down by 20%. The risk-free rate is 2% in the first period, 3% in the second period, and 1% in the third period. Using the risk-neutral pricing method, what is the no-arbitrage value today of an at-the money European put option on Prudential stock with maturity date t = 3? Would the value of the option change if it was American? Explain.

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