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What is the value of american put option

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Reference no: EM133112125

The current price of a non-dividend-paying stock is $40. Over each of the next two 90-day periods it is expected to rise by 5% or fall by 7.5%.

European and American options on the stock have a strike price of $41 and an expiration date in 180 days.

The risk-free interest rate is 2% per annum with continuous compounding.

Use 365 days in a year.

What is the value of each American put option?

Reference no: EM133112125

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