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Pricing an american put option

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Pricing an American Put Option

A non-dividend-paying stock currently sells for $560 and the stock price can increase or decrease by 10% insix months. The risk-free rate is 5% per annum. What is the price of 1-year American put option with the strike price of $580? Use the two-step tree. Is early exercise optimal?

Reference no: EM132697951

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