A stock priced at 50 can go up or down by 10 percent over two periods. The risk-free rate is 4 percent. Which of the following is the correct price of an American put with an exercise price of 55? a. 7.88 b. 3.38 c. 4.00 d. 5.00 e. 1.65 24.

Determine the value of u for a three period binomial problem when the options life is one-half a year and the volatility is 0.48. Use the model for u that does not require the risk-free rate. a. 1.22 b. 1.48 c. 1.40 d. 1.32 e. none of the above