Problem 3 Consider a 2-step binomial tree, with initial stock price being S10. For each time period, the stock price is expected to increase by 10% (when having an H) or decrease by 10% (when having a T) The interest rate Rm(n = 0, 1, 2), is given in the following binomial tree: R2(H H) = 6% P(H) 1/2 R1(H) 5% 3 Ro-4% Ri (T) = 3% 1/3 R2(TT)-2% Calculate the value of an American put option with strike price K 1, and write down the optimal exercising time for this derivative. (Note: the risk neutral probability, may be diferent for each step.)