Question: Please help explain in detail thank you for your help Let S = $40, r = 8% (continuously compounded), d = 1%, s = 25%,

Please help explain in detail thank you for your help

Let S = $40, r = 8% (continuously compounded), d = 1%, s = 25%, T = 2. In this situation, the appropriate values of u and d are 1.37713 and 0.83527, respectively. Using a 2-step binomial tree, calculate the value of a $45-strike American put option.

Selected Answer:	d. $5.402
Answers:	a. $4.987
	b. $6.159
	c. $6.014
	d. $5.402
	e. $4.603

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