What is the lowest strike price at which early exercise

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Reference no: EM132024886

Consider a one-period binomial model (implemented by a lognormal tree) with h=1 year, where S=$100, r=8% per annum (continuously compounded), ? = 30% per annum, and ? = 5% per annum.

a. What is the lowest strike price at which early exercise of an American put option will occur?

b. What is the highest strike price at which early exercise of an American call option will occur?

Reference no: EM132024886

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