1. Let a two-period binomial tree be given with the following parameters: S = $100,u= 1.10,d= 0.90, andrf= 5 percent. Consider a two-period American put option with a strike of $90. Note that this put is quite deep out-of-the-money at inception.

What is the value of the American put given these parameters?

Now suppose a dividend of $4 is paid at the end of the first period. What is the new price of the put?