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A stock price is currently $60. Over each of the next two six-month periods, it is expected to go up by 6% or down by
A stock price is currently $60. Over each of the next two six-month periods, it is expected to go up by 6% or down by 6%. The risk-free interest rate is 5% per year with semi-annual compounding.
1. Use the two-step binomial tree model to calculate the value of a one-year European put option with an exercise price of $61.
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