Question: Construct the binomial tree for a European put option with the following characteristics. Diagram the tree and show your calculations of the options value at

Construct the binomial tree for a European put option with the following characteristics. Diagram the tree and show your calculations of the options value at each of the nodes on the tree including its current (time t=0) value

Stock Price= 30

risk-free-rate=2%

Volatility= 20%

Strike Price= 34

time to expiration= 12 months

no. of steps= 3

No dividends

What is the value of the option at time t=0 (node A)?

What is the risk-neutral probability of a down move?

At how many of the ending nodes (t=12 months) would the option be exercised?

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