Question: Problem 2 (20 points). Consider the Binomial Asset Pricing Model, with u = 2, d = 1/2, r = 1/4 and So = 4. Consider

Problem 2 (20 points). Consider the Binomial Asset Pricing Model, with

Problem 2 (20 points). Consider the Binomial Asset Pricing Model, with u = 2, d = 1/2, r = 1/4 and So = 4. Consider an American Put Option with strike price K =9, maturing at time N = 3. Using a backward recursion, find the arbitrage-free price of the option at time 0, i.e. Vo under the risk-neutral probability

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