In the following questions (b)-(h), you use a 3-step binomial tree to calculate the theo- retical prices of different options with 6 months to maturity. The current USD risk-free rate (continuously compounded, annualized) is 3%. The dividend yield (continuously compounded, annualized) of the S&P 500 index is 1%. The estimated variance of daily log returns of the S&P 500 index is 0.000128572. The current S&P 500 index level is 4000.

B) The company offers American straddles. Each American straddle consists of a long call option and a long put option with the same strike price and maturity date. When you exercise the American straddle, you exercise the two options at the same time. Calculate the price of an American straddle with strike price 3700 (round to 4 decimal places). Is the price equal to the sum of prices of an American call and American put option with the same strike price and maturity date? Why or why not?