Find semi-annual compounding

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A stock price is currently $48. Over each of the next two three-month periods it is expected to go up by 6% or down by 5%. The risk-free interest rate is 3% per annum with semi-annual compounding.

Use the two-steps binomial tree model to price a 6-months European put option with an exercise price of $51.

Reference no: EM133076175

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