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As an option trader on GM stock, you have collected the following information:
(1) GM stock's current price is S = $100.
(2) GM's future prices follow a two-state path with u = 1.1052 (in Up state) and d = 0.9048 (in Down state) in each period.
(3) The one-period riskfree holding period return is R = 1.01.
Consider two American options on GM stock (a Put and a Call), both have a strike price of $110 and 5 periods before expiration.
(a) What is the value of the American Put today? Show your work.
(b) What is the value of the American Call today? Show your work.
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