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The current price of the stock of Bufflehead company is C$100. During each six-month period it...

The current price of the stock of Bufflehead company is C$100. During each six-month period it will either rise by 10% or fall by 10%. The interest rate is 6% per annum compounded semi-annually.

a. Calculate the value of a one-year European put option on Bufflehead's stock with an exercise price of C$115.

b. Recalculate the value of the Bufflehead put option, assuming that it is an American option.

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ANSWER IN THE IMAGE. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

A.

B.

jeff jeffy answered 1 year ago
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