q1 A stock is currently trading at $50; its annual volatility is 0.40, the risk-free interest rate is 15% per annum with

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answerhappygod
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q1 A stock is currently trading at $50; its annual volatility is 0.40, the risk-free interest rate is 15% per annum with

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q1
A stock is currently trading at $50; its annual volatility is
0.40, the risk-free interest rate is 15% per annum with continuous
compounding, and Δt is equal to three months. Use the binomial
model to answer the following questions:
i. Calculate the price of a 6-month European put option with an
exercise price of $105 written on this stock.
ii. Calculate the price of a 6-month American put option with an
exercise price of $105 written on this stock.
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