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A 2 month put option on the S&P 500 has a strike price of $475. The current value of the index is 485, the risk
A 2 month put option on the S&P 500 has a strike price of $475. The current value of the index is 485, the risk free rate is 10% per year, the dividend yield is 3% per year and the volatility is 25% per year.
A. Divide the time to expiration into four binomial periods:
i. What is the binomial price assuming the put is European?
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