: Consider an American put option on a stock, with a $65 strike and 1-year to expiration. The stock has a continuous dividend yield of 6%, and its current price is $48. Suppose the volatility of the stock is 29%. The continuously compounded risk-free interest rate is 10%. Use a three-period lognormal tree to calculate the following: (a) The payoff at time 2: Up movement. (b) The payoff at time 2: Middle movement. (c) The payoff at time 2: Down movement. (d) The payoff at time 1: Up movement. (e) The payoff at time 1: Down movement. (f) The option cost at time 0. (A) 4.05 (B) 3.05 (C) 2.05 (D) 5.05 (E) 1.05 (a): Select Part (a) choices. (A) 20.07 (B) 17.07 (C) 18.07 (D) 16.07 (E) 19.07 (b): Select Part (b) choices. (A) 34.71 (B) 31.71 (C) 32.71 (D) 33.71 (E) 30.71 (c): Select 1 Part (c) choices. (A) 6.21 (B) 9.21 (C) 7.21 (D) 8.21 (E) 10.21 (d): Select Part (d) choices. (A) 27.43 (B) 23.43 (C) 24.43 (D) 25.43 (E) 26.43 (e): Select Part (e) choices. (A) 15.00 (B) 14.00 (C) 17.00 (D) 18.00 (E) 16.00 (f): Select Part (f) choices. : Consider an American put option on a stock, with a $65 strike and 1-year to expiration. The stock has a continuous dividend yield of 6%, and its current price is $48. Suppose the volatility of the stock is 29%. The continuously compounded risk-free interest rate is 10%. Use a three-period lognormal tree to calculate the following: (a) The payoff at time 2: Up movement. (b) The payoff at time 2: Middle movement. (c) The payoff at time 2: Down movement. (d) The payoff at time 1: Up movement. (e) The payoff at time 1: Down movement. (f) The option cost at time 0. (A) 4.05 (B) 3.05 (C) 2.05 (D) 5.05 (E) 1.05 (a): Select Part (a) choices. (A) 20.07 (B) 17.07 (C) 18.07 (D) 16.07 (E) 19.07 (b): Select Part (b) choices. (A) 34.71 (B) 31.71 (C) 32.71 (D) 33.71 (E) 30.71 (c): Select 1 Part (c) choices. (A) 6.21 (B) 9.21 (C) 7.21 (D) 8.21 (E) 10.21 (d): Select Part (d) choices. (A) 27.43 (B) 23.43 (C) 24.43 (D) 25.43 (E) 26.43 (e): Select Part (e) choices. (A) 15.00 (B) 14.00 (C) 17.00 (D) 18.00 (E) 16.00 (f): Select Part (f) choices