Hello, Having difficulty with these two problems below An example worked out and explained would be great Thanks The current price of a non dividend paying stock is $50, volatility 20 and the continually compounding risk free rate 5 Use a two step tree with 6 month steps to value A European put option on the stock with a strike price of $48 that expires in 12 months An American put option with the same strike and expiration A non dividend paying stock has a price is $20 with volatility of 20 The continuously compounded risk free rate is 6 Use the Black Sholes Merton model to find the price of a 12 month European call option on the stock with a strike price of $20 What would be the price of a 12 month American call option with the same strike price if the stock were expected to pay a $2 dividend in 4 months and another $2 dividend in 10 months

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Question: Hello, Having difficulty with these two problems below. An example worked-out and explained would be great. Thanks! The current price of a non-dividend paying stock

Hello,

Having difficulty with these two problems below. An example worked-out and explained would be great. Thanks!

The current price of a non-dividend paying stock is $50, volatility 20% and the continually compounding risk-free rate 5%. Use a two-step tree with 6-month steps to value

A European put option on the stock with a strike price of $48 that expires in 12 months
An American put option with the same strike and expiration.

A non-dividend-paying stock has a price is $20 with volatility of 20%. The continuously compounded risk-free rate is 6%.

Use the Black-Sholes-Merton model to find the price of a 12-month European call option on the stock with a strike price of $20.
What would be the price of a 12-month American call option with the same strike price if the stock were expected to pay a $2 dividend in 4 months and another $2 dividend in 10 months?

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