Question: You want to use the binomial tree analysis to value a 2-year American put option with an $80 strike price on Crabbe and Goyle Corporation.

You want to use the binomial tree analysis to value a 2-year American put option with an $80 strike price on Crabbe and Goyle Corporation. The shares are currently trading for $110. The annualized continuously compounded risk-free rate is 5%. The volatility of the stock is 64%. You will use the Cox Ross Rubenstein method for computing the binomial tree. Draw the binomial tree and find the value of the option using a time step of 6 months (n=4)

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