Question: Q . Consider a two - period binomial model. The stock's price S is $ 1 0 0 . Every three months, it either goes

Q. Consider a two-period binomial model.
The stock's price S is $100. Every three months, it either goes up and gets multiplied by the factor u=1.2, or it goes down and gets multiplied by the factor d=0.8.
The continuously compounded risk-free interest rate r is 2 percent per quarter.
There is an American put option with an exercise price of $115, maturing in six months.
a. What are the risk neutral probabilities?
b. What is the price of the put option?
Q. Consider a two-period binomial model. The stock's price S is

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