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Binominal Option Pricing in One Period The simple riskfree rate is 10%. The current stock price is 60. In one period, the underlying stock price

Binominal Option Pricing in One Period

The simple riskfree rate is 10%. The current stock price is 60. In one period, the underlying stock price may go up to 90 or down to 54.

What are the payoffs of the European put option with K=72 in the up and down states?

What are the risk-neutral probabilities for the two states in one period?

What is the price of the European put today?

Would the value of the corresponding American put option be the same?

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