Please show workconsider a two-period binomial tree with, Ask an Expert

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Please show work.

Consider a two-period binomial tree with the following parameters: S = 100, u = 1:20, d = 0:80, and R = 1:10. Suppose also that a dividend of $5 is expected after one period.

Find the tree of prices of a European Put option with a strike of 100 expiring in two periods.

Find the tree of prices of an American Put option with a strike of 100 expiring in two periods.

Is there a difference between the European and American Put price and why (if there is any)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92875424

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