American put option-two step binomial tree

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Reference no: EM131909719

A stock index is currently 1,500. Its voatility is 18%. The risk free rate is 4% per annum (continuously compounded) for all maturities and the dividend yield on the index is 2.5%. Calculate values for u, d, and p when a six month time step is used. What is the value a 12 month American put option with a strike price of 1,480 given bya two step binomial tree.

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Reference no: EM131909719

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