Calculate the put value at each node of the tree

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Reference no: EM131990682

A stock price is $100 now-

In one-month, it can go 5% up or down.

In the second month, it can go 5% up or down.

And in the third month, it can go 5% up or down.

a) Construct a binomial tree for this stock (Show calculation/formula for each step). The annual interest rate is 10% with continuous compounding.

b) Use RISK-NEUTRAL PROBABILITIES to calculate the value of a three- month European put with the strike price 102

c) Calculate the put value at each node of the tree (Show clear steps and formula used)

Reference no: EM131990682

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