Question: This is all the information that was provided to me. There isnt anything external that was given. and (b)? 2. A 12-month American put option

This is all the information that was provided to me. There isnt anything external that was given.

and (b)? 2. A 12-month American put option with an exercise price of $1250 is written on a stock whose current price is $1300. The stock will distribute a 2% dividend six months from now. The riskfree interest rate is 4% and the stock's volatility is 20% per annum. a. Please use a three-step binomial tree to estimate the option value and the hedge ratio. (Hint: build the tree in spreadsheet to calculate the option value). b. However, if everything else is the same, what percentage dividend would imply a price of $75 for the option? (Hint: use the tree in part a to nd the correct percentage dividend by trial and error.) e. Also, if everything else is the same, what volatility would imply a price of $75 for the option? (Hint: as in part b)

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