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A non-dividend paying stock currently trades for$50 and has an annualised return volatility (Standard deviation) of 20%. Given that the continuously compounded risk-free rate of

A non-dividend paying stock currently trades for$50 and has an annualised return volatility (Standard deviation) of 20%. Given that the continuously compounded risk-free rate of return is 4% p.a.

Using a two-step binomial tree, price the European put option on the stock when the put has an exercise price of $55 and 3 months to maturity.

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