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What is the value of the american put today

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Reference no: EM131730165

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?

(b) What is the value of the American Call today?

Reference no: EM131730165

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