Calculate the value of the buffelhead american put

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Buffelhead's stock price is $221 and could halve or double in each six-month period (equivalent to a standard deviation of 97%). Assume that you own an American put option on Buffelhead stock with an exercise price of $221. The interest rate is 20% a year. Assume a six-month interest rate of 10.00%.

1. Calculate the value of the Buffelhead American put. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. Calculate the value of the European put. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Reference no: EM13932642

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