Question: Use a 2 step binomial tree with two steps to price a European 1 year put on a stock. The stock price is 70 today

Use a 2 step binomial tree with two steps to price a European 1 year put on a stock. The stock
price is 70 today and can increase or decrease by 5% every 6 months. The strike is 72. The risk
free rate is 3% per year.
a. Draw the tree with the final prices and option values filled out.
b. What is the p value or likelihood of a u or up price movement?
c. What is the price today of the one year put option?
d. What would the price be if this was an American option?
Use a 2 step binomial tree with two steps to price a European 1 year put on a stock. The stock
price is 70 today and can increase or decrease by 5% every 6 months. The strike is 72. The risk
free rate is 3% per year.
a. Draw the tree with the final prices and option values filled out.
b. What is the p value or likelihood of a u or up price movement?
c. What is the price today of the one year put option?
d. What would the price be if this was an American option?
I know the answer but I want you to explain it please
thank you

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