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Question 2 . The current price of a non-dividend paying stock is $35. Use a two-step...

Question 2 .

The current price of a non-dividend paying stock is $35. Use a two-step tree to value an American put option on the stock with a strike price of $33 that expires in 12 months. Each step is 6 months, the risk free rate is 6% per annum (continuously compounding), and the volatility is 15%. What is the option price? Show work in detail and use a tree diagram (Use 4 decimal places).

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jeff jeffy answered 1 year ago
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