Question: We want to price options using the binomial lattice. The current stock price is 54 and the strike price is 50. Assume that the

We want to price options using the binomial lattice. The current stock

We want to price options using the binomial lattice. The current stock price is 54 and the strike price is 50. Assume that the stock up-trend rate is u = 1.2 with probability p = 0.4 and the down-trend rate is d = 0.8 with probability 1 -p = 0.6. The annual risk-free rate is r = 0.005 with discrete compounding. Assume that the length of a period is one month. Using a binomial lattice find the price of a 5-month American put option.

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