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ABC Corporation is currently trading at $50, with volatility =20%, r=4%, and no dividends. Assume that the ABC stock price can be modeled according to

ABC Corporation is currently trading at $50, with volatility =20%, r=4%, and no dividends. Assume that the ABC stock price can be modeled according to the two period binomial approach with T=1 and n=2, so that the stock price moves every 6 months.

  1. Build out the binomial tree for ABC. What is the value of an American put option with strike price 60? What is the value of a European call option with strike price 55?

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