Question: Problem 2. Consider a financial market modeled by a 3-period binomial tree. Suppose a stock price at time 0 is S0=$40, and u=1.2,d=0.85. The continuously

Problem 2. Consider a financial market modeled by a 3-period binomial tree. Suppose a stock price at time 0 is S0=$40, and u=1.2,d=0.85. The continuously compound interest rate is r=5%. The period is one year and the dividend yield is 0 . (b) Calculate the price at t=0 of an American put option with expiration date T=3 and strike K=35

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