Suppose that S = $50, K = $45, = 30%, r = 8%, and T =

Suppose that S = $50, K = $45, σ = 30%, r = 8%, and T = 1. The stock will pay a discrete $4 dividend 4 months from now. Assume that the dividend is paid right before reaching the node. Compute the price of European and American put options using a three-step binomial tree.

Answer rating: 100% (QA)

The stock price at time 0 is 50 The stock price at the first node is 61... View the full answer