As American put option on a non-dividend paying stock has 4 months to maturity. The exercise price is $21, the stock price is $20, the risk-free rate of interest is 10% per anaum, and the volatility is 30% per annum. Use the explicit version of the finite difference approach to value the option. Use stock price interval of $4 and time intervals of I month.

annum. Use a binomial tree to value an American call option on copper with an exercise price of $0.60 and a time to maturity of 1 year. Divide the life of the option into four 3-month periods for the purposes of constructing the tree, (Hir: As explained in Section 14.7, the futures price of a variable is its expected future price in a risk- Deutral world.)