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What is the value of the american put today

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Reference no: EM132700740

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.

Reference no: EM132700740

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