21. Consider a binomial tree model with u = 1.05 and d = 0.90. Suppose the per-period interest rate is R = 1.02. Suppose the initial stock price is 100.
(a) What is the risk-neutral probability?
(b) Calculate the value of an American put option on the stock with a maturity of two periods and a strike of 95.
(c) Compute the early-exercise premium.
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