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A 1.5-year euro-denominated currency American put option to sell dollars is modeled with a 2-period binomial tree. You are given: (i) The spot exchange rate
A 1.5-year euro-denominated currency American put option to sell dollars is modeled with a 2-period binomial tree. You are given: (i) The spot exchange rate is 0.85 e/$. (ii) This exchange rate is expected to go up by 11% or down by 11%.
(iii) re = 0.055. (iv) r$ = 0.06. (v) The strike price is 0.9 e/$.
Determine the options premium.
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