Continuously compounded risk-free interest rate

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A stock price is currently $40. Over every 3-month period the stock prices goes either up by 10% or down by 10%. The continuously compounded risk-free interest rate is 12% per year. Use a 2-step binomial tree to find the value of a 6-month American put option with a strike price of $45.

Reference no: EM131067121

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