Question: Problems Due (PD): 7.1 and 7.4. Suggested Problems (SP): 7.2 and 7.3. uu 108.9 du 89.1 72.9 Use the above diagram for problems 7.1-7.2. S

Problems Due (PD): 7.1 and 7.4. Suggested Problems (SP): 7.2 and 7.3. uu 108.9 du 89.1 72.9 Use the above diagram for problems 7.1-7.2. S is a stock with multiperiod binomial tree shown above. The following hold: (i) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 4%. (ii) Each step in the tree is of one year. (iii) The risk free interest rate is 5% compounded continuously. 7.1. Determine the price of a 1.5 year 89-strike American put on the above stock

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